Buy To Open Example -

: Two weeks later, the neighborhood explodes, and the house is now worth $1,200,000 . You exercise your right to buy it for the agreed $1,050,000 , instantly gaining $150,000 in value (minus your $5,000 fee).

: When you pay that $5,000 to get that contract, you have "bought to open" your position. You didn't own a contract before; now you do. Two possible endings to the story: buy to open example

Instead of buying the house right now, you pay the owner a (the premium ) for a contract that gives you the right to buy that house for $1,050,000 (the strike price ) anytime in the next 30 days. : Two weeks later, the neighborhood explodes, and