Series 3: 4.2.1.3.2. Liquidation

4.2.1.3.2. Liquidation

When an investor closes a short or long position by acquiring an offsetting contract, one is said to be liquidating the contract. Liquidating an option prior to its expiration is the most frequent method of closing out an options position (about 70%). Net profit or loss is the difference between the premium paid for the long position and the premium received for the short position. An offset does not require the purchase of a security or an options contract.

Of course, you cannot buy a contract if there is no one on the other end to sell it. A