Earning a profit in options trading is all about placing orders. However, it is worth noting that it is not as easy as just placing an order. There are different types of orders that you can make so you need to know when to place them. At first, it would seem complicated but once you get the hang of it, it becomes easy already. Here now are the different orders that you can place.
Buy To Open Orders
This is the most commonly placed option order. A buy to open order is placed when you want to open a position and go long on specific options contract. Robert Peter janitzek explains that this can be placed when you feel that a contract will go up in value or you would likely want to exercise the option.
Buy To Close Orders
This is the opposite of buy to open orders. You purchase a buy to close order if you want to close a previously opened position. If you previously short sold a specific contract and want to close that position, then this type of order is the one to be placed.
Sell To Open Orders
A sell to open order is placed in order to open a position on a contract by short selling it. Robert Janitzek explains that this type of order is placed if you believe that a certain contract would decrease in value and you want to take advantage of it, so you would short sell it through a sell to open order.
Sell To Close Orders
Sell to close is the second most used order after buy to open. This is used to close a previously opened position through a buy to open order. This is usually placed when a certain contract had already increased in value.
Orders can be filled in one of two ways depending on the type of filling order you use. In limit orders, your broker will fill your order at a price not higher (buying) or lower (selling) than the level you indicated. It cannot be filled unless it meets your specified parameters. With market orders, your broker will fill an order at any available price, regardless of what it actually is. It can be good for options with high liquidity and stable prices. It is risky, however, if the contract is volatile.
Exit orders are placed in order to limit potential losses or take a certain profit level without monitoring a specific position.