How to Close a Single-legged Option Position
Option contracts can be held to expiration or, as they often are, traded prior to expiration. Below are the simple steps to close an existing single-leg option position from the chart.
This opens the menu allowing the position to be Closed or Rolled (click here for instructions on rolling a single-legged option).
In this example, Sell to Close 2 Jul '17 Call 12.50. (Each option contract will have its specific close selection.)
This will place a close position order ticket for the option on the chart.
The close position order ticket will always do three things:
- Select the correct position size (in this case, 2 contracts)
- Place the order on the right side of the market (e.g.sell to close on long positions; buy to cover on short positions)
- Combine the order in an OCA (Once-cancels-all) group with any other Sell order on the chart.
The Limit slider shows the spread between the natural (in this case, the bid) and the far (in this case, the ask). To set a price (net premium) within the spread at which to place your order, click at any point on the slider. The limit value is seen in the price field next to the "Lmt" order type.
Another way to take advantage of the spread is the Step to Limit order. Choose the Step to Limit order from the drop down menu. (A Step to Market order acts the same as a Step to Limit order except that if no preferable fill is achieved during the step period, the order then moves to the Market price.)
Set the beginning of the slider at the limit price desired for the initial order. This will be the limit price at which the order will be entered.
Over the predetermiend time period the limit price (net premium) will be automatically modified up from the initial entry price toward the Natural (or selected) price. The step to limit order will attempt to secure a preferable fill price in this process. Modification stops if no preferable fill is received and the limit price reaches the Natural.
The trading tools work on either a LIVE brokerage account or a PAPER (simulated) trading account. Live market trading requires an account with TC2000 Brokerage (www.TC2000Brokerage.com).