Sell To Close

What is 'Sell To Close'

Sell to close, in options trading, is an order to sell an option that you own and terminate your position. Sell to close specifies that you want to sell the option in order to close your existing long position in the option. This is in contrast to sell to open, which means you intend to initiate a short position in the option by writing it.

BREAKING DOWN 'Sell To Close'

The options market is unusual in that a retail investor can participate in the market by buying options and by writing options. It is important to correctly close out long options positions by specifying sell to close. If sell to open is specified instead, then the broker will enforce the margin requirement for a naked short while the original long position remains open.

RELATED TERMS
  1. Writing An Option

    The expression "writing an option" refers to the act of selling ...
  2. Sell To Open

    A phrase used by many brokerages to represent the opening of ...
  3. Short Leg

    Any contract in an option spread in which an individual holds ...
  4. Buy To Open

    A term used by many brokerages to represent the opening of a ...
  5. Back Fee

    A payment made to the writer of a compound option in the case ...
  6. Forex Option & Currency Trading ...

    A security that allows currency traders to realize gains without ...
Related Articles
  1. Professionals

    Options

    Options
  2. Options Seller Traders

    In contrast to buying options, an options seller trader sells stock options. This comes with an obligation to sell the underlying equity to a buyer if that buyer decides to exercise the option ...
  3. Options & Futures

    Options Pricing: Introduction

    Options are derivative contracts that give the holder the right, but not the obligation, to buy or sell the underlying instrument at a specified price on or before a specified future date. Although ...
  4. Options & Futures

    Introduction - Day Trading and Options

    Options have not been a tradition part of day-trading strategy, but this is quickly changing.
  5. Options & Futures

    Types of Options

    There are many different types of options. In addition to general put options and call option, we will discuss 13 different types of options. Some of these option types are better suited to day ...
  6. Professionals

    Options Basics

    You can use these investment vehicles to mitigate risk.
  7. Professionals

    Exchange Traded Options

    CFA Level 1 - Exchange Traded Options. Contrasts over the counter options from those traded on the exchange. Discusses the characteristics of many exchange traded options.
  8. Options & Futures

    Stock Options: What's Price Got To Do With It?

    A thorough understanding of risk is essential in options trading. So is knowing the factors that affect option price.
  9. Forex

    Forex Options

    Stocks are not the only securities underlying options. Learn how to use FOREX options for profit and hedging.
  10. Professionals

    Managing An Option Position

    Both the buyer and seller, in an option trade, establish the position with an opening transaction. The buyer has an opening purchase and the seller has an opening sale. To exit the option position, ...
RELATED FAQS
  1. What do the phrases "sell to open", "buy to close", "buy to open", and "sell to close" ...

    The confusing terminology mentioned in the question deals with entering and exiting option orders. In review, there are two ... Read Answer >>
  2. Do options make more sense during bull or bear markets?

    Understand how options may be used in both bullish and bearish markets, and learn the basics of options pricing and certain ... Read Answer >>
  3. How can derivatives be used to earn income?

    Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered ... Read Answer >>
  4. How do you trade put options on Ameritrade?

    Learn about option trading with TD Ameritrade. Explore the different types of options and their possible impacts on the investors ... Read Answer >>
  5. When does one sell a put option, and when does one sell a call option?

    The incorporation of options into all types of investment strategies has quickly grown in popularity among individual investors. ... Read Answer >>
  6. Are there any risks involved in trading put options through a traditional broker?

    Explore put option trading and different put option strategies. Learn the difference between traditional, online and direct ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center