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What does "buy to open" mean?

In one line: Buy to open is the order that starts a new long option position: you pay the premium and get the right, but not the duty, to buy or sell 100 shares at the strike.

Trading glossary · Updated 2026-10-26

How it works

Buy to open starts a new long option position. You pay the premium. In return you get a right:

• A bought Call option gives the right to buy 100 shares at the strike.
• A bought Put option gives the right to sell 100 shares at the strike.

It's a right, not a duty. You can use it (Exercise), sell it later with Sell to close, or let it expire. The most you can lose is the premium you paid.

It's the mirror image of Sell to open. When you sell a put to open, someone on the other side has usually bought one to open.

An example (hypothetical)

XYZ trades at $50 (an illustration, not a trade idea). You send: Buy to open, 1 XYZ $50 call, 30 days out, limit $2.00. You pay $200.

The buyer needs XYZ to rise past $52 just to break even. In two of these four rows, the whole premium is gone. That's the seller's side of the same trade, seen from across the table.

Why it matters for sellers

Sellers use buy to open more than they think:

• Protection. Buying a put under shares you own sets a floor. Paired with a covered call, that's a Collar.
• Spreads. Buying a cheaper option to limit the risk of one you sold.
• The long leg of a Poor man's covered call, where a long-dated call stands in for shares.

Knowing the buyer's view helps too. The buyer pays for time and hopes for a big move. You're paid for time and hope for a quiet one. In the wheel strategy, you're almost always the one on the other side of a buy-to-open order.

A ticket mistake to avoid: if you meant to close a short option and chose "buy to open," the order may be rejected or may not do what you meant. Check that the preview says close before you send.

Questions