What are the types of orders used to trade options?
There are four basic orders for both calls and puts. They are: 1. Buy To Open – The investor or trader buys a call or put option. 2. Sell To Close – The investor or trader sells an existing call or put option to offset or liquidate a prior purchase. 3. Sell To Open – The investor or trader sells a new call or put, without previously owning the position. Selling a call or put can give you unlimited risk and limited profit potential exactly the opposite situation when purchasing an option. That’s one reason we refrain from recommending this strategy. 4. Buy To Close – The trader buys back a call or put sold short.
