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Buy to close is a strategy that involves buying back anexisting short position.
By buying back an option they initially sold, traders can neutralize their existing position.
Consider the following example.
Here are a few other other order types and when to use each.
The two have much in common.
For example, both can be used forcalls or puts.
However, there are two key differences.
This kind of order sells an existing long position to exit a contract instead of buying a short position.
Monitoring Market Conditions
Volatility measures the degree of a securitys price changes in either direction.
The greater and more rapid the price fluctuations, the higher the volatility.
Traders monitor market conditions and have a go at anticipate and capitalize onrising or falling volatility.
Per-contract fees, which are typically $0.65, can also add to your expenses.
Preventing Additional Losses
Traders use the same strategy to limit what they believe will becontinuing negative volatility.
The strategy lets them buy back the same contract they previously sold to neutralize expiring positions.
FAQ
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