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Ask the Institute

DATE: October 22, 2012

QUESTION:

Can you please explain what "opening transactions" and "closing transactions" are as they pertain to buy and sell orders you’d place with your broker?

ANSWER:
An opening transaction - or an opening order, as it is sometimes called - is an order that either creates a new position or increases an existing position. When trading options, it is important to remember that both buy orders and sell orders can be opening transactions. A closing transaction - or closing order - is an order that reduces or eliminates an existing position. And, just as both buy orders and sell orders can be opening transactions, so too can they be closing transactions. To learn more about opening and closing transactions, view this week’s segment of "Ask the Institute."


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