Hi all. Probably a stupid question but please bear with me. When you sell a put or call and want to close it out before the expiry day to avoid it being exercised against you (assuming it ends up ITM), is there a difference between just closing it (which on my platform IB TWS means right-clicking on the trade and selecting close) and buying to open another trade (same underlying, strike, and expiration)? Many thanks
Opening an offsetting position closes an existing position. You can't be both long and short on the same contract. It has to be the exact same contract (underlying, strike, expiry, right).
Maybe still depends on your trading platform/broker. I used to trade with optionsXpress more than 10 years ago and back then they had weird situations where you bought to open or bought to close and you could have the same contract twice in your account - once short once long - then you paid commissions twice and they reconciled the contract on a daily basis. I think that was mainly cause their platform wasn't that great though. With IB, TOS or Tastyworks (which are the 3 I use now) - there's no difference (between buying to close or buying to open) once you buy you close your short - if you buy more contracts than what you had short contracts you'll end up with long contracts in the account. Pretty straightforward.
[QUOTE="danjuma, post: 4406689, member: 99196" right-clicking on the trade and selecting close) [/QUOTE] This command tells TWS to put in a market order.