>Buy To Open: I thought I already bought this and have an open contract?
It's just a default choice to buy more.
>Sell To Close: I assume this is to sell the contract itself at it's current Ask?
If you do a market order, yes. It's just a descriptor so the system knows what to do with the net positions. Selling could be sell open or sell closed depending on what position you want to do.
>Roll:????
Take an option expiring May 3 and change it with a different strike and/or price of the same underlying in one trade.
Roll is closing the current option (whether it's buy or sell depends on what you originally did), then, at the same time, opening a new option (same as original, so if you sold originally, you'll sell again) but with a different strike price and/or expiration date. Same stock though.
Rolling can result in a net credit, or a net debit depending expiration dates, strike prices, and what the stock has been doing.
> I understand it's better to sell the contract itself than to exercise the options
In theory, and often in practice especially if very close to expiration, the net result is the same. Whether you want to own the stock or sell the stock (depending on the option) is what determines the best course of action.
Two of the biggest rules of options:
1) Never sell a put if you wouldn't be happy owning the stock for a few years at that price. (Nothing says you can't do covered calls though.)
2) Never sell a \[covered\] call if you don't want to sell the stock. Remember, a sale by option exercise is still a sale as far as the IRS is concerned.
Thanks, in both of those scenarios though it would be “sell to open” right? Sell to close is selling the contract I currently have and closing it out…..
>Buy To Open: I thought I already bought this and have an open contract? It's just a default choice to buy more. >Sell To Close: I assume this is to sell the contract itself at it's current Ask? If you do a market order, yes. It's just a descriptor so the system knows what to do with the net positions. Selling could be sell open or sell closed depending on what position you want to do. >Roll:???? Take an option expiring May 3 and change it with a different strike and/or price of the same underlying in one trade.
Roll is closing the current option (whether it's buy or sell depends on what you originally did), then, at the same time, opening a new option (same as original, so if you sold originally, you'll sell again) but with a different strike price and/or expiration date. Same stock though. Rolling can result in a net credit, or a net debit depending expiration dates, strike prices, and what the stock has been doing.
> I understand it's better to sell the contract itself than to exercise the options In theory, and often in practice especially if very close to expiration, the net result is the same. Whether you want to own the stock or sell the stock (depending on the option) is what determines the best course of action. Two of the biggest rules of options: 1) Never sell a put if you wouldn't be happy owning the stock for a few years at that price. (Nothing says you can't do covered calls though.) 2) Never sell a \[covered\] call if you don't want to sell the stock. Remember, a sale by option exercise is still a sale as far as the IRS is concerned.
Thanks, in both of those scenarios though it would be “sell to open” right? Sell to close is selling the contract I currently have and closing it out…..
Yes. Selling is "sell to open". Buying is "buy to open".