I have been demo trading for the past 5 - 6 months and have been focusing on only writing contracts. I have always thought that when you write a contract it is set in stone once it's filled. Meaning that you have to wait for it to expire and take the huge loss that comes with writing contracts if there is one, or take your premium. I was reading an article yesterday and it stated that near expiration you have the ability to buy the contract back to close the position but your premium is greatly reduced. Now I know when you buy an option contract you can sell to close, but my question is can you buy to close a short/written contract? I always thought you could not... If so what are the requirements that allow you to buy it back? Can you buy it back anytime? I'de appreciate any information on this part of writing contracts.
1) You can "initiate" a long or short position 2) Later, you can "offset" your long or short position. 3) As a long or short, you always have the "option" of offsetting your open position or letting it expire worthless or letting it be automatically assigned or exercised. 4) As long as the option you are trading isn't locked at a price-limit, you can freely get into and out of a position.
Go buy an options book please before you end up like the head of a wall street brokerage firm (e.g. bankrupt)
Can anyone give a good recommendation for a decent book on the processes of options trading like the question the poster has given?
i suggest reading this before you try trading with real money and lose everything. it is beyond my comprehension to think you could be exposed to unlimited risk and never think you could cover it. http://www.amazon.com/Option-Volati...=sr_1_1?ie=UTF8&s=books&qid=1265684996&sr=8-1