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
Check what you hold
Long, short or nothing in that exact contract.
Opening long
Buy to open: start or add to a long position.1
Closing long
Sell to close: exit or reduce a long position.1
Opening short
Sell to open: start or add to a short position.1
Closing short
Buy to close: exit or reduce a short position.1
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
+120.00Hypothetical: buy to open 2 calls at 1.50, later sell to close at 2.10 (multiplier 100).
| P&L | (2.10 − 1.50) × 2 × 100 = 120.00 |
Selling to close ended the long position.1
Example 2 — Short put closed
+50.00Hypothetical: sell to open 1 put at 0.80, buy to close at 0.30.
| P&L | (0.80 − 0.30) × 100 = 50.00 |
Buying to close ended the short position.1
Example 3 — Wrong label
MistakeA hypothetical trader holding 1 long call clicks sell to open instead of sell to close.
| Result | New 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
| Aspect | Opens | Closes |
|---|---|---|
| Long side | Buy to open | Sell to close |
| Short side | Sell to open | Buy to close |
| Open interest | Can rise | Can fall |
| Risk | Adds exposure | Reduces exposure |
Where the labels matter
Options
Every Options order needs a label.
Positions
Track each Position.
Short calls
Covered calls start a Short Selling option.
Data
Labels feed Open Interest.
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.
Common mistakes
Sell to open instead of sell to close
Check your position first.
Closing a different strike
Match the exact contract.
Forgetting the multiplier
Contracts usually cover 100 units.
Ignoring assignment risk on shorts
Short options can be assigned.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Labels say open or close.
- Long: buy to open, sell to close.
- Short: sell to open, buy to close.
- Wrong label = new position.
- Close the exact same contract.
Frequently asked questions
Do stocks use these labels?
Can I add to a position with 'to open'?
What if I let it expire?
Further learning
- Options
Options basics.
- Open Interest
How labels feed it.
- Short Selling
Short positions.
- Margin
Short-option margin.
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.
- Fidelity. Making Your First Options Trade (Learning Center deck) (opens in a new tab) Checked .
- Montréal Exchange (TMX). Glossary of Derivatives (opens in a new tab) Checked .
- 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.