What is the purchase for opening?

Definition and Example of Buying to Open

Buying to open in trading is when you open a position in options or futures, meaning you are initiating a derivatives contract. For example, you can buy a call or put option to open a position in the options for a given stock.

How Does Buying to Open Work?

Buying to open works by granting you ownership of the derivative. For example, if you place a buy order to open for put options, you are buying put options that give you the right to sell the stock at a specified price. You are said to be opening a position because owning these contracts puts you in a position to profit from movements in the underlying security.

Buying to Open vs. Selling to Open

Buying to open involves purchasing a derivative to open a position. Investors can also sell derivatives contracts. Selling to open means opening a position by selling a derivative rather than buying it.

What Does This Mean for Individual Investors?

If you are an investor interested in using derivatives, it is generally better to buy derivatives rather than sell them. When buying options, the risks are limited so you do not have to worry about unexpectedly draining your account by selling an option that generates huge losses.

Key Takeaways

Buying to open in trading is when you open a position in options or futures by purchasing a contract. Investors can close their open position later by placing a sell order to close. Buying to open in options is less risky than selling them, so using buy orders to open as opposed to sell orders to open is preferable for individual investors.

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Source: https://www.thebalancemoney.com/what-is-buy-to-open-5268008