What is a Close Out?
Sometimes referred to as an offset or an even up, a close out involves the reduction or termination of a current position on a given investment. At the same time, the investor will make an opposite transaction using the same underlying security. In effect, the outcome of the close out strategy is to maintain the amount of investment, but possible position the investor to realize a greater return from the underlying security. One of the easiest ways to understand the function of a close out is to apply the strategy to a futures contract. In effect, the owner of a futures option may choose to get out of the existing contract by taking out a contract to sell the futures. Once a buyer for the contract has been secured, the investor is free to enter into another futures contract with more agreeable terms, but still associated with the same underlying security. As far as the utilization of resources, the goal of the close out is to maximize return while minimizing the amount of investment ne
