I am party A. If party A's call is in-the-money prior to the strike date, the call's intrinsic value increased.

Let's assume party A wants to take profits now. If party A doesn't have the obligation to sell anything to party B following B's purchase of A's in-the-money call option, why does party B buy the call?

By selling-to-close the original buy-to-open position with the exact same contract, you are creating offsetting positions. Imagine there is only one options contract in the universe. You bought it from person A whom sold it to you let's assume they sold to open and you sell it to person C. You no longer have any obligations wrt to this contract but person A still does.

In reality, if I'm not mistaken these transactions generally are cleared though a clearing house and chains of closed positions are more than likely novated i.

What to Expect at Options Expiration | TD Ameritrade

A buys a call to open from counter party B who sells the call to open. There are four possible outcomes:. A sells his call to C and the counter parties are now B who is short the call and C who is long. No one does anything and the call expires in-the-money ITM. This has the same effect as 2. Sign up to join this community. The best answers are voted up and rise to the top. Stack Overflow for Teams — Collaborate and share knowledge with a private group. Create a free Team What is Teams? Learn more. Who is on the buy-side of a sell-to-close call options trade?

Options Exit Strategies: Get Out or Roll On?

Ask Question. Asked 10 months ago. Active 10 months ago. Viewed 1k times. Improve this question.

Your Answer

One option controls a fixed amount of the underlying security. For example, one option controls shares of stock. You can trade two types of options -- calls and puts.

1. nifty options positional strategies.
2. How Options Work;
3. forex currency live charts.
4. forex eod strategy?

A call gives you the right to buy the underlying security, while a put gives you the right to sell. However, unlike stocks, options are wasting assets. Use the buy to open transaction order when you want to purchase a call or put option. Buy to open lets you establish a long or short position in the underlying security.

Buy to Close

The option premium is immediately debited from your account. To profit, the underlying security price must either increase enough to push the call option price past the break-even point or fall enough to drive the put option price below the break-even point. To close out the trade, you must buy the call or put option back using a sell to close transaction order. The buy to close transaction order is used to close out an existing option trade. The trade was originally opened using a sell to open transaction order by which you sold a call or a put.

This placed you in a short position regarding the underlying security.

When you are ready to exit the trade, the buy to close transaction order closes out your short position. For a put trade to profit, the underlying security price must fall enough to drive the put option price below the break-even point. When you establish a short option position, you are credited with the option premium.

• Options Order FAQs.
• Further Reading On Options Trading...;
• Call options: Learn the basics of buying and selling.
• 100 ema forex strategy?

The short position also makes you vulnerable to large losses should the trade move swiftly against you. As more the price of the underlying security continues to rise, the greater your loss will be. Based in St. Petersburg, Fla. She received a bachelor's degree in business administration from the University of South Florida.