Opening and Closing Transactions

What this video covers

• Why the Options Clearing Corporation (OCC) guarantees every trade and lets investors freely enter and exit positions
• The four basic transaction types (buy to open, sell to open, sell to close, buy to close) and which position each one creates or eliminates
• Why opening transactions increase open interest and closing transactions decrease it
• The classic exam trap that "sell to open" creates a brand new short position, while "sell to close" eliminates an existing long position
• The three ways an option position ends: closing transaction, exercise and assignment, or expiration
• Why exercise is always the holder's choice, and how a writer can avoid assignment by buying to close before the holder exercises
• Why most options are closed out in the secondary market rather than actually exercised