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. Long-Term Equity Anticipation Securities ...

    Publicly traded options contracts with expiration dates that ...
  2. Stock Option

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

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

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

    The last day that an options or futures contract is valid. When ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
Related Articles
  1. Getting Acquainted With Options Trading
    Options & Futures

    Getting Acquainted With Options Trading

  2. Using
    Options & Futures

    Using "The Greeks" To Understand Options

  3. Understanding The 2010 Options Symbology ...
    Options & Futures

    Understanding The 2010 Options Symbology ...

  4. Stock Options: What's Price Got To Do ...
    Options & Futures

    Stock Options: What's Price Got To Do ...

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center