Order TypesIntermediate

Buy to Open, Sell to CloseBTO

These labels say whether an order opens or closes a position: buy to open and sell to close for long positions, sell to open and buy to close for short positions — common in options trading.

Options orders say whether you are opening a new position or closing one you already hold. There are four labels: buy to open and sell to close for long positions, sell to open and buy to close for short positions. Picking the wrong one can open a new position when you meant to exit.

Category
Order Types
Reading time
3 min
Also called
Opening and closing transactions, Open and close orders
Updated

Open and close orders in plain words

“Buy to open” starts or adds to a long options position.1

“Sell to close” exits or shrinks a long options position.1

Any opening trade creates or adds to a position.2

How to choose the right label

  1. Check what you hold

    Long, short or nothing in that exact contract.

  2. Opening long

    Buy to open: start or add to a long position.1

  3. Closing long

    Sell to close: exit or reduce a long position.1

  4. Opening short

    Sell to open: start or add to a short position.1

  5. Closing short

    Buy to close: exit or reduce a short position.1

  6. Match the contract

    A closing trade either sells an option you bought or buys back one you sold.2

Worked examples

Example 1 — Long call round trip

+120.00

Hypothetical: buy to open 2 calls at 1.50, later sell to close at 2.10 (multiplier 100).

Example 1 — Long call round trip — calculation
P&L(2.10 − 1.50) × 2 × 100 = 120.00

Selling to close ended the long position.1

Example 2 — Short put closed

+50.00

Hypothetical: sell to open 1 put at 0.80, buy to close at 0.30.

Example 2 — Short put closed — calculation
P&L(0.80 − 0.30) × 100 = 50.00

Buying to close ended the short position.1

Example 3 — Wrong label

Mistake

A hypothetical trader holding 1 long call clicks sell to open instead of sell to close.

Example 3 — Wrong label — calculation
ResultNew short call

Choosing “sell to open” created a new short instead of closing the long, so the account now holds two positions.1

The four labels

AspectOpensCloses
Long sideBuy to openSell to close
Short sideSell to openBuy to close
Open interestCan riseCan fall
RiskAdds exposureReduces exposure

Where the labels matter

Advantages and disadvantages

Advantages

  • Makes your intent explicit.
  • Helps brokers track positions and margin.
  • Feeds open-interest data.

Disadvantages

  • Easy to click the wrong label.
  • Short options can carry large risk.
  • Labels vary slightly by platform.
  • Beginners confuse them with stock orders.

Going deeper

Read as far as you need. Each level builds on the one before it.

Opening

Beginner

Opening trades build a position; closing trades take it down.2

Closing

Intermediate

To close, you do the opposite of how you opened: sell what you bought, or buy back what you sold.2

Open interest

Advanced

Whether each side is opening or closing decides how open interest changes.3

Common mistakes

  1. Sell to open instead of sell to close

    Check your position first.

  2. Closing a different strike

    Match the exact contract.

  3. Forgetting the multiplier

    Contracts usually cover 100 units.

  4. Ignoring assignment risk on shorts

    Short options can be assigned.

Check your understanding

Test yourself before moving on. Each answer comes with an explanation.

Q1You hold a long put and want out. Use…
Q2Sell to open 3 calls at 1.20, buy to close at 0.70 (×100). P&L =

Key points to remember

  1. Labels say open or close.
  2. Long: buy to open, sell to close.
  3. Short: sell to open, buy to close.
  4. Wrong label = new position.
  5. Close the exact same contract.

Frequently asked questions

Do stocks use these labels?

Usually not; they are mainly for options.

Can I add to a position with 'to open'?

Yes, to open also adds.

What if I let it expire?

No closing order is needed, but check exercise rules.

Further learning

Sources

This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.

  1. Fidelity. Making Your First Options Trade (Learning Center deck) (opens in a new tab) Checked .
  2. Montréal Exchange (TMX). Glossary of Derivatives (opens in a new tab) Checked .
  3. Options Industry Council (OIC). FAQ: General Information (opens in a new tab) Checked .

Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.