What is the difference between closing and option and exercising it

The key difference between closing an option and exercising it is the action taken by the trader and the consequences on their position:

1. **Closing an Option**:
- Closing an option involves selling the option contract to exit the current long position.
- This is typically done when the trader no longer wants to hold the position or as a risk management strategy.
- By selling the contract, the trader is effectively transferring the obligation to another party and realizing any profit or loss from the trade.
2. **Exercising an Option**:
- Exercising an option means utilizing the rights granted by the contract to buy or sell the underlying asset at the predetermined strike price.
- This action results in the trader purchasing or selling the underlying stock at the strike price, effectively ending the options contract.
- Exercising an option is typically done when the trader believes the underlying asset's price will reach the strike price before the option expires.
- It can also be a way to lock in a profit if the option is in-the-money, as the trader can buy or sell the asset at a price that is better than the current market price.

In summary, closing an option is a way to exit a trade by selling the option contract, while exercising an option involves using the contract to buy or sell the underlying asset. The choice between the two actions depends on the trader's strategy, risk tolerance, and the current market conditions.