Expiration (options)
Encyclopedia
For an option
contract
, expiration is the date on which the contract expires. The option holder must elect to exercise
the option or allow it to expire worthless.
Typically, option contracts expire according to a pre-determined calendar
. For instance, for U.S. exchange-listed equity
monthly option contracts, the expiration date is always on the Saturday that follows the third Friday of the month, unless that Friday is a market holiday, in which case the expiration is on the Friday.
In the case where the option is not exercised, upon expiration any margin
charged by the clearing firm
to the holder or writer of the option is released. The margin may then be used for any purpose, for instance to finance subsequent option trades.
Option (finance)
In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...
contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
, expiration is the date on which the contract expires. The option holder must elect to exercise
Exercise (options)
The owner of an option contract may exercise it, indicating that the financial transaction specified by the contract is to be enacted immediately between the two parties, and the contract itself is terminated...
the option or allow it to expire worthless.
Typically, option contracts expire according to a pre-determined calendar
Calendar
A calendar is a system of organizing days for social, religious, commercial, or administrative purposes. This is done by giving names to periods of time, typically days, weeks, months, and years. The name given to each day is known as a date. Periods in a calendar are usually, though not...
. For instance, for U.S. exchange-listed equity
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
monthly option contracts, the expiration date is always on the Saturday that follows the third Friday of the month, unless that Friday is a market holiday, in which case the expiration is on the Friday.
In the case where the option is not exercised, upon expiration any margin
Margin (finance)
In finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty...
charged by the clearing firm
Clearing (finance)
In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction....
to the holder or writer of the option is released. The margin may then be used for any purpose, for instance to finance subsequent option trades.
External links
- The Options Clearing Corporation - Option Expiration Calendar
- Options calendar Futures Expiration calendar
- Options ScreenersOption screenerAn option screener is a tool that evaluates options based on criteria and generates a list of potential trading ideas. Most people who trade options are technical traders. It essentially means they look for patterns in charts. Also they use statistical correlations and deviations and give them...