Options Trading Tutorial

What's the difference between buying to open and selling to open when trading stock options?

For a call option and for a put option.

Public Comments

1. When you "buy to open" a stock call option you pay a premium and in return you receive the right, but not the obligation, to buy the stock at the strike price until the expiration date. When you "sell to open" a stock call option you receive the premium paid by the buyer of the option and in return you accept the obligation to sell the stock at the strike price any time up until the expiration date if, and only if, the option is exercised and you are assigned. When you "buy to open" a stock put option you pay a premium and in return you receive the right, but not the obligation, to sell the stock at the strike price until the expiration date. When you "sell to open" a stock put option you receive the premium paid by the buyer of the option and in return you accept the obligation to buy the stock at the strike price any time up until the expiration date if, and only if, the option is exercised and you are assigned. Any time you "sell to open" a stock option you are giving someone else the right to make a stock trade in your account. You can be confident that trade will only take place at a price worse than the existing market price for the stock.