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Options Transactions
Unlike stock trading, the contractual nature of options offer four different ways for entering and exiting positions. There is an options writer(seller) and an options holder(buyer). The writer can enter or exit a transaction, and so can an option buyer.
Buy-to-Open
This is the transaction the options buyer make to enter a long position on an option. For example, if you want to buy a call option, you would enter a "buy-to-open" transaction.
Sell-to-Close
This is the transaction the options buyer make to exit a long position on an option. For example, if you want to sell a previously purchased call option, you would enter a "sell-to-close" transaction.
Sell-to-Open
This is the transaction the options writer make when he wish to enter a short position on an option. For example, if you are writing call options to earn premiums, you would enter a "sell to open" transaction.
Buy-to-Close
This is the transaction the options writer make when he wish to exit a short position on an option. For example, if you wish to buy back the calls you had previously sold, you would enter a "buy-to-close" transaction.
