Options Trading Tutorial

can someone give me an example for the following Option trading actions?

buy to open? buy to close? sell to open? sell to close? I bought 1 contract of GOOG Jan 2010 call if I decide to take profit do I just do sell to close? another question is..if I decide to exercise my option, which one do I pick? buy to close? I really don't understand what's sell to open Buy to close confuses me too on Scottrade's explanation page.

Public Comments

1. buy to open? WHAT YOU DID buy to close? IF YOU WERE COVERING A SHORT sell to open? SHORTING sell to close? WHAT YOU'LL DO IF YOU PROFIT I bought 1 contract of GOOG Jan 2010 call if I decide to take profit do I just do sell to close? YES (your string is missing the strike price) another question is..if I decide to exercise my option, which one do I pick? buy to close? sell to close I really don't understand what's sell to open (SHORT) Then you really shouldn't be trading. You'll make money on google by luck.
2. Options are a right to buy or sell stock at a certain strike price with an expiration date at some time in the future. You can sell it before you buy it if you expect it to be worth little or nothing on the expiration date or possibly decline enough to enable you to buy it any time in between for less. If you are wrong, then you take the loss or give up the stock if you sold a 'covered' call--or you must take a loss or buy the stock at above market value if you sold a put on a stock that went down in value. Selling a put is like buying a stock.. For example you sell a $55 put on a stock currently selling for $60--then if it drops below $55 you must buy it to cover or pay $ 55 for the stock even if it drops to $10--but at least you are better off than if you had bought it at $60 since you get it at $55 plus you keep whatever you received when you sold the put,
3. Hi, I don't mean to be a jerk but, I hope you are doing this on paper and not for real. I recommend that you read some books on Option Trading Bernie Schaeffer is one of my favorite. Option trading is complicated and risky if you don't understand what you are doing and how you expect to make money on your trades without having a strategy.
4. Don't mess with "options" untill you truly understand them. Most good Option traders don't buy individual calls or puts. They buy spreads. Check out; http://www.cboe.com/ https://www.thinkorswim.com/tos/displayPage.tos?webpage=onlineSeminar http://www.redoption.com/ http://www.optionplanet.com/ http://www.optionsuniversity.com/ http://www.sheridanmentoring.com/ Sell to open (opening a position by selling a covered or naked call or put). This would take a chapter in a good book to totally explain. You'll need to read at least three good books on trading options (after checking out the web sites above). It will take you a year to three years (or more) to feel "comfortable" in trading options. Start with some basic stratagies; Covered calls. Collar Iron Condor etc. Options will destroy your account balance unless you understand the "Greeks". If you don't know what the Greeks are...... stop trading now! Using Scottrade to trade options is also setiing your self up for failure. Check out; http://www.thinkorswim.com/ http://www.optionsxpress.com/ http://www.optionshouse.com/ (I like ThinkOrSwim the best of the top three)................
5. <<<can someone give me an example for the following Option trading actions? buy to open? buy to close? sell to open? sell to close?>>> You always start with a "to open" trade. Until you have opened a position there is nothing to close. If you "buy to open" a call option you are buying the right to buy the underlying for a fixed price for a fixed time. If you "buy to open" a put option you are buying the right to sell the underlying for a fixed price for a fixed time. If you use a "sell to open" trade you are accepting money to give someone else the same right, making a commitment to honor that right if he exercises it. This is also known as "writing" an option. If you "sell to open" a call option you are accepting money and in return agreeing to sell the underlying at a fixed price for a fixed time if, and only if, the option holder (buyer) chooses to exercise his right. If you "sell to open" a put option you are accepting money and in return agreeing to buy the underlying at a fixed price for a fixed time if, and only if, the option holder (buyer) chooses to exercise his right. A "to close" trade is only possible after a "to open" trade and is used to realize a profit or a loss. If your initial trade was a "buy to open" you would realize a profit or loss with a "sell to close" trade. If your initial trade was a "sell to open" you would realize a profit or loss with a "buy to close" trade. Note that if an option expires or is exercised there is no "to close" trade since those actions also close the option position. <<<I bought 1 contract of GOOG Jan 2010 call if I decide to take profit do I just do sell to close?>>> Yes, if you can sell it for enough to make a profit. <<<another question is..if I decide to exercise my option, which one do I pick? buy to close?>>> You do not pick any of them. Those are all types of trades. Exercising an option is different than trading it. Most brokerages have a separate transaction to exercise an option, although some (including mine) require your to telephone the broker and give instructions to exercise the option.