2.3.2 Open/Closed

Every option trade is either for a market participant to open and hold a contract, or to close and void the contract. Unlike stocks where a set amount of shares exist and exchange hands, options contracts are written into existence by an options seller. For example, if participant A buys a call option from participant B that B did not own previously, this means that B is “writing” the contract, and this trade is the birth of this option. In contrast, if A sells that call option back to participant B, then participant B’s contract obligation is nullified and the contract is destroyed or closed. The number of open contracts on the market are aggregated from all of the market makers and tallied by OPRA. However, to avoid exposing intraday trading vulnerabilities of participants, the number of open contracts is only updated once per day during early morning pre-market trading. Thus, although we can observe the price and volume of every option trade, we do not know which trades are meant to open or close a position.