What Is an Opening Transaction?

An opening transaction, a term typically associated with derivative products, refers to the initial buying or selling that establishes, or opens, a new position. One can buy to open to establish a long position or 澳洲幸运5官方开奖结果体彩网:sell to open a short position. Once an opening transaction has occurred, there thus exists an 澳洲幸运5官方开奖结果体彩网:open position.

The opposite of an opening transaction is called, appropriately enough, a 澳洲幸运5官方开奖结果体彩网:closing transaction. In that case, one could 澳洲幸运5官方开奖结果体彩网:sell to close an existing long, or 澳洲幸运5官方开奖结果体彩网:buy to close an existing short.

Understanding Opening Transactions

Simply put, an opening transaction is the act of initiating a new trade. It can involve taking a new position in a specified security or the entrance into a variety of different derivative contract positions that remain open for a specified time frame. The term is commonly associated with options trading. 澳洲幸运5官方开奖结果体彩网:Options strategies, such as writing an opt𒉰ion short or buying an option long, would be examples of an opening transaction.

An opening transaction is the initial step when placing a trade and it involves the purchase of an asset or financial instrument. It generally—but not always—involves a closing transaction at a later point in time, which may be on the same day for an 澳洲幸运5官方开奖结果体彩网:intra-day trade, or days, weeks, or months later for a longer-term investment. An opening transaction can have different considerations for different types of investments, and these considerations will be significantly different for publicly traded securities versus 澳洲幸运5官方开奖结果体彩网:derivatives.

Less commonly, an opening transaction can also refer to the first trade for a specific security on a given trading day. Specifically, this refers to that security's traded price, which is of importance to investors as it gives them a means of comparison to the 澳洲幸运5官方开奖结果体彩网:closing price of the previous trading day.

Publicly Traded Securities

Investors may choose to invest in a publicly traded security through an opening transaction with various motivations. Generally, investors will buy a security for its capital appreciation or income potential. Investors may see long-term potential in a security due to its growth or value characteristics over time. These motivations can be driven by a security's revenue estimates, earnings potential,ꦬ or fundamental ratios.

Investors and, more specifically, day traders or 澳洲幸运5官方开奖结果体彩网:technical analysts may choose to enter a security position through an opening transaction for its short-term gains. Short-term investors will typically enter an investment with a more defined time frame, seeking to close the position relatively quickly to take advantage of favorable short-term 澳洲幸运5官方开奖结果体彩网:volatility. In this scenario, an investor꧟ may open and close a transaction wit🦂hin a matter of hours, days or weeks.

Derivatives Positions

An opening transaction that enters an investor into a derivative contract has a relatively more important meaning for consideration than an opening transaction for a publicly traded security. When an investor enters a derivative position, they have a specified amount of time for which to generate profit from the investment. This requires them to, more closely, monitor t✅he position throughout its 🌳life.

In an 澳洲幸运5官方开奖结果体彩网:American option contract, after an opening transaction, an investor has the right to exercise that contract at any time up until the expiration. After expiration, the contract is considered closed. With a 澳洲幸运5官方开奖结果体彩网:European option, the option holder can exercise the option only on the expiration date. For🅰 both American and European options, the investor can also trade their option in the market to close out the position.

In a futures contract, an investor buys the derivative for execution on a specified date. They can always sell the contract on the open market up until the expiration. If they hold the contract until the expiration, then they are obligated to meet the demands of the contract, which might include delivery.