What is a Closing Purchase?

Have you thought about making your fortune on Wall Street and the world of high finance? If so, you’ve probably noticed that there are so many different terms and concepts used that you’ve never heard of before. One of these is “closing purchase.” A closing purchase will be made in order to reduce or eliminate altogether a position, which can either be long or short, on a stock or an options series.

In order to understand a closing purchase, you first need to understand the meaning of two things: positions and options. A position is finance industry jargon for having possession of a commodity, option, contract or security. They are almost always held in a brokerage account. So, when an investor or broker wants to buy an option, he or she is placing an order that people refer to as “buy to open.” With a closing purchase, conversely, the investor or broker places an order to “sell to close.” A long position means that you actually own the security, and a short position means that you owe it. Options, on the other hand, are contracts to buy or sell a stock within a certain period of time. A closing purchase will be executed in order to sell the option.

Closing purchases are relatively easy to perform. You simply inform your broker (or whoever is managing your investment portfolio) that you think the time is right to make the a nice profit – or to cut your losses and keep them at a minimum, as the case may be. Your broker or financial agent will then make the closing purchase for you. Of course, you can do this yourself if you’ve got the necessary experience, but most people leave it to their brokers.

To learn more about closing purchases and other terms that are specific to the world of investing and high-finance, be sure to sit down with your financial advisor and go over your questions in as much detail as you need in order to feel comfortable. After all, you can never have too much information when it comes to your money.