It can decrease or leave open interest unchanged, depending on whether the buyer is also opening or closing a position.
You pay a premium (debit) to a seller to acquire the rights of a contract. Result: You become the "holder" or "buyer" of the option.
In options trading, "Buy to Open" (BTO) and "Sell to Close" (STC) are the two halves of a standard . They describe the lifecycle of a trade where you purchase a contract first and exit it later by selling it. 1. Buy to Open (BTO): Entering the Trade buy to open sell to close
This order is used to a position you previously opened via BTO. When you execute an STC order: Action: You sell your existing contract to another party.
You relinquish your rights and realize a profit or loss based on the difference between your initial BTO premium and the current STC premium. It can decrease or leave open interest unchanged,
It typically increases open interest , as a new contract is often being created between you and a seller. Strategic Intent:
Most traders use STC to capture the option's remaining extrinsic value (time value and volatility) rather than exercising, which only captures intrinsic value. Comparison Summary Master the Basics: 4 Key Options Trading Strategies In options trading, "Buy to Open" (BTO) and
You expect the underlying asset's price to fall (bearish). 2. Sell to Close (STC): Exiting the Trade