Close by comparison: locking versus closing for the weekend

[Fairman]

Close by comparison: locking versus closing for the weekend

A trader unsure about holding a position over the weekend has a choice. Close it, or lock it with an opposite position. They behave differently.

Closing realizes the spread, and the position is gone. Locking holds both, paying the spread on the second leg, and keeps margin tied up on many brokers. Swap is charged on both legs on some platforms, and the weekend triple may apply.

Locking also hides risk. If one leg has a stop and the other doesn't, an unlocking mistake on Monday can leave a naked position at a gap.

The idea of locking usually appeals when the trader wants to avoid realizing a loss for psychological or tax reasons. The cost is real, and the benefits are largely emotional.

A fair comparison counts the extra spread, the swap on both legs, the margin held, and the risk of mistakes when unlocking. Added up, closing is nearly always cheaper.

There are rare situations where locking makes sense, such as when a position is in a jurisdiction with specific tax treatment. Those are exceptions.

When did locking a position ever turn out cheaper than simply closing it?