What is a Closing Sale?
The closing sale is a type of transaction that allows an investor to end a purchased position associated with a given option. Closing sales are often employed when an investor wishes to exchange a long position for a short one, or vice versa. Generally, the approach will involve selling the stocks options when the contract is near to close. Around the same time, the investor will purchase an option series with the same terms as the option that is being sold, with the difference being the position date associated with both actions. The function of the closing sale is to allow the investor the opportunity to maximize the chance of making a return on investment in a given set of stocks. By purchasing a block of shares associated with the option, the investor can enjoy the benefits of returns for the duration of the ownership. As the position on the investment grows short, the investor moves to sell the currently owned options and effectively replace them with similar options that have a l
A closing sale is made in order to reduce or eliminate a long position (or buy) on a stock or an options series. In order to understand a closing sale, you first need to understand the meaning of two things: long positions and options. A long position is a finance industry jargon for having possession or buying of a commodity, option, contract or security. These possessions are held in a brokerage account. So, when an investor or broker wants to buy an option, he or she is placing an order that people refer to as “buy to open.” With a closing sale, conversely, the investor or broker places an order to “sell to close.” Options, on the other hand, are contracts to buy or sell a stock within a certain period of time. A closing sale will be to sell the option, either altogether or to a large degree. Closing sales are relatively easy to perform. You simply inform your broker (or whoever is managing your investment portfolio) that you think the time is right to make a nice profit – or to cut
