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Trades during can be made in two ways – calls and puts. You make a call to buy, mainly, with the expectation that the price of the stocks will rise, and selling a put allows you to give rights to someone else to sell but it does not give the obligation, however, you can restrict loss by using a limit.
Buy to open can be used for both calls and put. It indicates the transaction order where you establish a long or short position where the medium will be immediately debited from your account.
Beginners assume it is used for long but it can be volatile. It offers a flexible opportunity to speculate on value.
Buy to close allows the investor to buy back the sold portfolio asset.
There can be situations when you sell at higher rates and then buy at a lower price.
It can be used for closing a short, or at the time used to sell to collect the premium but it is not the type of low-risk investment option as it can make you vulnerable to huge losses, especially, in conditions when the price moves swiftly in opposite directions. It is used when the investors are in net short on a position or when they net credit.
The difference, mainly, exists in your position, if you are going long on your position or paying a net debit to open – a buy to open can be used.
Sell to close provides a common exit order because average investors simply go “long” with either a call or a put.
It represents the types of investing solutions were to gain the underlying security or the on-line commodity trading option, should either increase or fall below the break-even to drive the put.
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