"Sell To Open" a Call or "Buy to Open" a Put when Trend is Bearish
"Sell To Open" a Call or "Buy to Open" a Put when Trend is Bearish
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Bhanu · External communityPost link
External question — Personal Finance Stack Exchange
Author: Bhanu
Original post: https://money.stackexchange.com/questions/124902
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
I trade options. I "Buy to Open" and then "Sell to Close". I don't exercise them. I have never traded by "Sell to Open" followed by "Buy to Close", which I don't know when to use.
When stock price declines, a put's premium might not increase due to time decay. But a call's premium would definitely come down.
Here is my understanding on STO/BTC. If wrong, please correct me:
Suppose a BTO call option that expires the next day is $1.00 and the next day, irrespective of stock price move, the premium dropped to $0.30. Could I buy the call for $1.00 and on the next day BTC at $0.30 for a profit of $0.70 ??
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Quoted from Forex.com.bd-Editorial External question — Personal Finance Stack Exchange Author: Bhanu Source score (net votes, not local likes): 0 Original post: https://money.stackexchange.com/questions/124902 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I trade options. I "Buy to Open" and then "Sell to Close". I don't exercise them. I have never traded by "Sell to Open" followed by "Buy to Close", which I don't know when to use. When stock price declines, a put's premium might not increase due to time decay. But a call's premium would definitely come down. Here is my understanding on STO/BTC. If wrong, please correct me: Suppose a BTO call option that expires the next day is $1.00 and the next day, irrespective of stock price move, the premium dropped to $0.30. Could I buy the call for $1.00 and on the next day BTC at $0.30 for a profit of $0.70 ??
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