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What does "sell to open" mean?

"Sell to open" is the order you use to start a trade by selling an option. You collect the premium now, and you take on the promise that comes with it.

Options guide · 5-minute read · Updated 2026-10-26

The short answer

Sell to open means you open a new position by selling an option you don't already hold. You get paid the premium right away. In return, you owe the buyer something: to buy shares (for a Put option) or sell shares (for a Call option) at the Strike price if they use the contract.

After a sell-to-open order fills, your account shows the option with a minus sign, like "−1." That means you are short one contract. You're the seller, and the promise is open.

The four order types in one table

Every option order is one of four. Two words decide it: are you buying or selling, and are you starting or ending a position?

Sellers live in the top two rows. You sell to open, and later you either buy to close, let it expire, or get assigned.

Why the broker asks: the same contract can be bought to open or bought to close. The broker needs to know if you're starting something new or ending something old. Pick the wrong one and the order may be rejected, or you may end up with a position you didn't mean to have.

Where it shows up in the wheel

The wheel strategy is two sell-to-open orders taken in turn:

1. Sell to open a put with cash set aside. That's a cash-secured put.
2. If you're assigned and now own 100 shares, sell to open a call on them. That's a Covered call.

Each time, you collect a premium and take on a promise.

A small example (an illustration, not a trade idea)

A made-up stock, XYZ, trades at $50. You place a sell-to-open order for one 30-day $45 put at $1.00. It fills. You collect $100. Your broker sets aside $4,500 in case you must buy the shares.

Here's how the trade can end:

Placing the order

On most order tickets, you'll pick:

• The action: Sell to open (sometimes just "Sell" with "Open" chosen elsewhere).
• The contract: the stock, the expiry date, the strike, and call or put.
• The quantity: the number of contracts. One contract covers 100 shares.
• The price: use a limit order, often near the middle of the bid and ask. A market order on a wide spread can fill at a poor price.

Read the confirmation before you send it. It should say "sell to open," the right strike, the right expiry, and a credit, not a debit.

Mistakes to avoid

• Choosing "sell to close" by accident when you don't own the option. Most brokers reject it, but read the screen.
• Selling more contracts than you can cover. Each put needs strike × 100 in cash. Each call needs 100 shares.
• Treating the credit as profit on day one. You only keep it free and clear once the option is gone. Until then, the promise is open.

Questions