Sell To Close (STC)

What is the sell to close order? How do I close a long options position?

Sell To Close (STC) - Introduction

So, how to you sell options that you bought? Using the Sell To Close order of course

No other publicly traded financial instrument in the world has more types of trading orders than options.

The variety of trading orders that options trading has is one of the first things that astonished options trading beginners and also one of the first mistakes options traders make. Indeed, using the wrong orders would no doubt result in unnecessary losses and frustration, which makes understanding how they work extremely important. There are four main trading orders that options traders use and they are; Buy To Open, Sell To Close, Buy To Close and Sell To Open.

This tutorial will explain in detail what "Sell To Close" is.

When To Use Sell To Close?

Buy To Open (BTO) and Sell To Close (STC) are the most basic trading orders all options trading beginners must know. Sell To Close is to be used when selling options that you currently own, no matter call or put options. Yes, you Sell To Close call options and Sell To Close put options as well. A lot of beginners misunderstand buying put options as "shorting the stock" and uses the Buy To Close order in order to "buy back" the "short stock" position. That is wrong. If you bought call options or put options using a Buy To Open order, you would close them using the Sell To Close order.

To be more technical, Sell To Close (STC) is used to close or trade out of a long position.

The picture below explains the orders matching in options trading. As you can see, Sell To Close (STC) orders are used in closing positions established using the Buy To Open.

The Sell To Close (STC) order can be used to close open long positions at anytime before the options contract expires.

Remember, always use the Sell To Close order when SELLING options that you currently own.

What Does Sell To Close Mean?

Sell To Close (STC) means "Closing a position by Selling". This is exactly the same thing as selling stocks. Closing a position is to trade out of an existing position. By closing a position, the position would no longer exist in your account and the resultant profit or loss would be realized. There are two main ways to close an options position; Selling a long position or Buying a short position. Sell To Close is used for selling a long position.

When you Sell To Close (STC) an options contract, you are actually selling the options contracts that you own to a market maker in order to realize a profit or loss. To get an immediately fill, you should use the Sell To Close order at the option's BID price.

Sell To Close Call Options and Put Options

You Would Sell To Close (STC) call options and put options when you wish to take profit or stop loss on those options contracts that you own. In fact, this is the exact order you will use when closing a Long Call or Long Put options strategy. Sell To Close call options relinquishes your ownership of those options and you will no longer benefit from further appreciation in their value nor will you be able to exercise them anymore.

Example : John wants to sell the Jan40Call that he owns on the QQQQ in order to take profit. He will Sell To Close (STC) the Jan40Calls.

Sell To Close Questions

:: Liquidity Concerns About Selling Options?