What Is the Buy to Close Method in Options?

Buy to Close is the order you use to exit a short options position by buying back the very same contract you previously sold to open. It applies only to short positions — contracts you opened by selling (Sell to Open) rather than buying. Placing it ends your obligation under the contract, which is the important part: once the position is closed you can no longer be assigned, so the open-ended risk that comes with being an options seller stops at that moment. Your result is the difference between the premium you originally collected and the premium you pay to buy the contract back: if the premium has fallen, you keep the difference as profit; if it has risen, closing costs you more than you received and you realise a loss. Because Pluang's options are American-style, assignment can happen at any point before expiry, so Buy to Close is the tool you reach for when you want to cap that exposure rather than wait for expiry.

How Buy to Close works in practice:

• Applies to short positions only: use Buy to Close to exit a contract you sold to open. To exit a contract you bought to open, use Sell to Close instead — they are mirror actions for opposite starting positions.
• It ends assignment risk: while a short position stays open you can be assigned at any time, because Pluang's options are American-style. Buying the contract back closes the position and removes that exposure entirely.
• Your profit or loss: premium collected at open minus premium paid at close. A cheaper buy-back than your original sale is a profit; a more expensive one is a loss.
• Order types: you can submit Buy to Close as a market order (fills immediately at the best available price) or a limit order (fills only at your price or better), subject to the liquidity on that contract.
• You don't have to wait for expiry: Buy to Close can be placed at any time while the market for that contract is open, which is the main way sellers actively manage a position that has moved against them.
• Fees: the standard Options transaction fee of 0.3% of the transaction value (minimum $3.00 per transaction) applies to the closing trade as well as the opening one — the exact amount is shown in the app before you confirm.

Related questions:

Q: What is the difference between Buy to Close and Sell to Close?
They close opposite positions. Buy to Close ends a short position — you buy back a contract you previously sold to open, ending your obligation. Sell to Close ends a long position — you sell a contract you previously bought to open, releasing the right you had held. Which one you use is decided entirely by how you opened the position, not by preference: if you sold to open, your exit is Buy to Close; if you bought to open, your exit is Sell to Close.

Q: Does Buy to Close remove my assignment risk?
Yes, and that is usually the main reason to place it. Assignment risk exists only while you hold an open short position — the buyer on the other side can exercise, and because Pluang's options are American-style they can do so at any point before expiry, not only on expiry day. The moment your Buy to Close order fills, the position is closed and you can no longer be assigned on it.

Q: Can I lose money using Buy to Close?
Yes. Your result is the premium you collected when you opened the position minus the premium you pay to close it. If the contract has become more expensive since you sold it — typically because the underlying moved against your position — buying it back costs more than you received, and the difference is a realised loss. Closing early at a loss is often still the cheaper outcome than leaving a short position exposed to assignment.

Q: Do I have to use Buy to Close, or can I just let the contract expire?
You can let it expire, but you give up control by doing so. While the position remains open you stay exposed to assignment at any time before expiry, and on expiry day Pluang force-closes any position still open roughly one hour before market close — at whatever the market price is then. Placing your own Buy to Close order lets you pick the timing and, with a limit order, the price.