What Exactly Is Closing Purchase, and How Does It Work?

About closing purchase

A closing purchase, also named “buy to close”, is a transaction where the investor intends to reduce or close a specific financial instrument. Option traders use the phrase “buy to close” to refer to a closing purchase. It means that an option trader is selling or closing out either a call or a put option.

How does closing purchase to close work？

Buy to close is a transaction order used when a trader is net short an option position and wants to end that open position. It reverses the initial trade where you received a credit or premium from short selling options. The buy-to-close order has one main purpose: to close out or terminate a position that a trader opened because they short-sold their options contracts. This means a trader needs to have written an option that they short-sold.

It is important to note that put buyer can lose his entire investment if the underlying security does not decline below the strike by expiration.

About option trading

Option trading is the trading of instruments that give you the right to buy(call) or sell(put) a particular security on a set date at a predetermined price (strike price). An option is basically a contract between a seller and a buyer. The trader has to write a contract in order to create an option.

Option trading platforms on WikiFX

There are many brokers that offer good option trading services in the markets. We want to show you two brokers on WikiFX as examples.

TD Ameritrade

TD Ameritrade is considered best broker for mobile options traders. TD Ameritrade clients can trade a wide variety of assets on the web platform as well as mobile apps. This includes exchange-traded funds (ETFs), stocks, options, futures, and cryptocurrency.

USD$0.65 per contract, with no ticket charge, exercise, or assignment fees. Option fees are waived when you buy to close any short individual or single leg option for USD$0.05 or less.

IG

To ensure greater openness and compliance with strict regulations, IG is publicly traded on the Stock Exchange. Low Forex trading fees, a comprehensive teaching center, a wide variety of powerful trading tools, and solid research are just some of IG's many positives as a trading partner. IG claims that it offers a wide range of tradable financial instruments for global investors, over 18,000 instruments, including Forex, indices, CFDs on stocks, digital cryptocurrencies, and options trading for investors to choose from.

If you want to know more information about these brokers or the reliability of these brokers, you can open WikiFXs website (https://www.WikiFX.com/en). Or you can download the WikiFX APP for free through this link below (https://www.wikifx.com/en/download.html).