Expiration Cycle

AAA

DEFINITION of 'Expiration Cycle'

The calendar cycle of expiration months that is assigned to basic exchange-traded stock options. With a few exceptions (some options will have contracts in every month), most equity options are set up to trade with expiration months in one of the following three formats:

January Cycle: Expirations in January, April, July, October (the first month of each quarter)

February Cycle: Expirations in February, May, August, November (second month)

March Cycle: Expirations in March, June, September, December (third month)

INVESTOPEDIA EXPLAINS 'Expiration Cycle'

Some options may have contracts in every month of the year, but this is usually reserved for highly liquid underlying securities, such as ETFs on the S&P 500. Options such as these are often used to hedge a portfolio and, because they represent a basket of stocks, the security is more stable. The strike prices tend to hold up better as a result.

With single stock options, a given strike price that once seemed valuable can quickly become obsolete, such as a $25 strike price in a call option on a stock that drops suddenly from $27 to $15 over the course of a month.

LEAPS are not subject to standard expiration cycles because they are derivative contracts that are one year or more away from expiration.

RELATED TERMS
  1. Stock Option

    A privilege, sold by one party to another, that gives the buyer ...
  2. Option Series

    A specific set of calls or puts on the same underlying security, ...
  3. Call Option

    An agreement that gives an investor the right (but not the obligation) ...
  4. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  5. Long-Term Equity Anticipation Securities ...

    Publicly traded options contracts with expiration dates that ...
  6. Catastrophe Equity Put (CatEPut)

    Catastrophe equity puts are used to ensure that insurance companies ...
Related Articles
  1. Options & Futures

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  2. Options & Futures

    Using "The Greeks" To Understand Options

    These risk-exposure measurements help traders detect how sensitive a specific trade is to price, volatility and time decay.
  3. Options & Futures

    Understanding The 2010 Options Symbology

    There is a wealth of information in the expanded option symbols, but they should make things easier for traders.
  4. Options & Futures

    Stock Options: What's Price Got To Do With It?

    A thorough understanding of risk is essential in options trading. So is knowing the factors that affect option price.
  5. Options & Futures

    Long-Term Equity Anticipation Securities: When To Take The "LEAP"?

    Options are always speculative, but LEAPS provide a longer time frame, which may make them more profitable.
  6. Options & Futures

    Understanding Option Pricing

    Take advantage of stock movements by getting to know these derivatives.
  7. Options & Futures

    Stock Option Expiration Cycles

    Understanding expiration cycles is just one more way to help you increase your success rate when trading options.
  8. Chart Advisor

    ChartAdvisor for March 27 2015

    A weekly technical summary of the major U.S. indexes.
  9. Chart Advisor

    Is Now the Time to Invest in North America?

    Bullish chart patterns across the North American markets suggest that now might actually be a wise time to allocate closer to home.
  10. Mutual Funds & ETFs

    Want to Go Long Natural Gas? Eye the UGAZ ETN

    Is UGAZ the best way to play natural gas? Maybe not.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center