Options Trading Tutorial

Option trading in Scottrade - difference between "buy to open, buy to close, sell to close, and sell to open"

I'd like to try investing in Options, but it asks me if I want to "buy to open, buy to close, sell to open, and sell to close". Which one basically means "hold the option until it expires, and then automatically sell it?" (assuming I make money, of course) By the lingo, I would think sell to open, but I guess that's why I'm asking. Which open option do I use where I don't want to buy the common stock when it expires?

Public Comments

1. I'm not sure what you are asking for, but I'll tell you the meaning of the options. Let's use as an option example Yahoo Strike 30 March and say trading at $.65 an option and you are going to buy/sell one contract Buy to open- Buy to open is to buy this option and for 1 contract you would pay $65 and $8 transaction fee. Sell To Close- You can not do this first, you need to own and option first. So, if you bought the yahoo option and it is now worth $.9 You would sell it and make $90 $-8 transaction fee. Now what I think you are interested in is the opposite Sell to open- means that you sell this option and you will recieve $65 in your account - transaction fee and you could do whatever you want with your money. Buy to close is simply to buy back your option. If you think the option will expire worthless and do not want to buyback, then you may not need to do this action. Hope I was some help. ALSO VERY IMPORTANT. If you have sold more than one option contract and it is likely to be exercised, buy back the option. Because buy back is only $7 +1.25(per contract) per transaction, but getting exercised is $8 per contract.