Buy To Open
A "buy to open" is often used when you want to pray that you'll make money in the options market by purchasing a call (predicting the price of a stock will go up) or a put (predicting the price will go down).
The cost of the option will be debited from your account, and then you will wait to see if your predictions are correct. You will make a profit if the stock price goes higher than your break-even point on your call option, or fall below your break-even point for your put option. Once that happens, you need to buy the call or put option back using a “sell to close” order.
If you are simply buying a particular stock for the first time, your first transaction is also a “buy to open” in order to include it in your portfolio. When you sell all your holdings for the stock, that is the sell to close. Very different from "Sell Two Clothes," which you'll find all over the place on eBay.
Related or Semi-related Video
Finance: What is an All or None Order?71 Views
finance a la shmoop what is an all-or-none order oh you'd think that
spoiled brats only live on playgrounds of participation trophy cities hmm but [Boys holding participation trophies]
that is oh so sadly not true they roam the wild hallways of Wall Street
investment firms in droves and all-or-none order means that a buyer or
seller of stock either wants all of their shares bought or sold or none of
them and yes this applies to bonds preferred stocks and other random [Man discussing stocks and bonds]
hybrids as well.....A buyer has a portfolio of 500 million dollars in small cap
growth stocks generally speaking she's told her clients that she won't take
less than a 2% position in anything because she wants to be able to focus on
a core group of stocks and really be on top of any big movements hoping to sell [Stocks in a sack land on a table]
the shares before well, any huge problems holding so in this case she's
found a company she loves an appropriately named coal company for [Woman looking through binoculars in her car]
spoiled investors called mine mine mine the only problem is that the stock is
thinly traded that is not a ton of shares trade every day and she needs to
own either ten million dollars worth of stock which would be a two percent
position or she doesn't want to own any the stock at the moment is trading at
ten dollars and seven cents a share and she wants it at ten bucks or better...
well at ten dollars and one penny she has no interest whatsoever in that stock [Stock graph for mine mine mine company]
at 10.00 she's a buyer so that is her limit order but on this all-or-none
order she waits and waits and waits knowing that sometimes all-or-none [Woman looking at laptop waiting for the stocks]
orders simply never get filled other times they get filled scarily too fast
like the seller knew something the buyer did not but along comes a bad market day
the White House says something stupid what are the odds? and the market tanks for
an hour and blam she is the proud new owner of a million shares of mine mine
mine good for her those shares are now all hers hers hers [Pigeon poops on mans head]
Up Next
What is a limit order, and how can we be sure we never have one of those in place when we go to a doughnut shop?