Definition
The term opening transaction refers to the process of creating a position taken by an investor in the options market. The opening transaction creates the rights and obligations under an options contract.
Explanation
An opening transaction is any process that effectively creates a position in the options market. An option can open in several ways, including an investor establishing a long or short position with respect to call or put options. For example, an investor can write a call option which can be exercised at a later date. The writing of the option would be the opening transaction, while exercising a right would be a closing transaction.
Although less common, the term opening transaction can also refer to the opening price paid for a stock on any given trading day.
Related Terms
collar, option class, closing transaction, cash settlement
