A closing sale is made in order to reduce or eliminate a long position (or buy) on a stock or an options series. In order to understand a closing sale, you first need to understand the meaning of two things: long positions and options. A long position is a finance industry jargon for having possession or buying of a commodity, option, contract or security. These possessions are 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 sale, conversely, the investor or broker places an order to “sell to close.” Options, on the other hand, are contracts to buy or sell a stock within a certain period of time. A closing sale will be to sell the option, either altogether or to a large degree.
Closing sales 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 a nice profit – or to cut your losses and keep them at a minimum. Your broker or financial agent will then make the closing sale for you. Of course, you can do this yourself if you’ve got the necessary experience, but most people leave it to their brokers.
If you want to learn more about closing sales and other terms that are specific to the world of investing, 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.