Opening Transaction

Opening transaction

Applies to derivative products. (1)Buy or sell transaction that creates a position out of a flat one (writing an option short or buying an option long). Antithesis of closing transaction. (2) First transaction of the day in a stock.

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opening transaction

1. The initial transaction during a trading day for a particular security. The price at which an opening transaction takes place is important to investors who have placed market orders before the market opens or who have placed at-the-opening orders, because the price at which the opening transaction takes place is the price that these investors will pay for or the price they will receive for the security. Compare closing transaction.

2. An option order that establishes a new investment position or that increases the size of an existing investment position. Compare closing transaction.

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Opening Transaction

1. In options contracts, the transaction which starts either a long position or a short position. For example, if an investor writes a put option and then later exercises the option, the initial writing of the option contract is referred to as the opening transaction and its exercise is the closing transaction, because it closes a position. The opening transaction is thus an investor's first trade in a series of at least two related trades.

2. The first trade on a given security on a given trading day. This especially refers to the price at which the security is traded. Investors like to know the price of the opening transaction because it gives them a comparison to the prices of the previous trading day, which helps them attempt to predict short-term trends. It is also important to investors who placed orders for a security after the close of the previous trading day: the price of the opening transaction is the price the investors will pay or be paid.