Expiration Cycle

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)

BREAKING DOWN '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. Option Cycle

    The expiration dates that apply to the different series of options. ...
  2. Expiration Time

    A specified time, after which the options contract is no longer ...
  3. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  4. FMAN

    One of the three regular option cycles; represents the months ...
  5. Roll Forward

    To extend the expiration or maturity of an option or futures ...
  6. Serial Option

    A short-term option on a futures contract in which the underlying ...
Related Articles
  1. Trading

    Stock Option Expiration Cycles

    Understanding expiration cycles is just one more way to help you increase your success rate when trading options.
  2. Investing

    Income Strategies for Your Portfolio to Make Money Regularly

    Discover the option-writing strategies that can deliver consistent income, including the use of put options instead of limit orders, and maximizing premiums.
  3. Trading

    Do Option Sellers Have a Trading Edge?

    Take a look at a study that discovered that three out of every four options expired worthless.
  4. Investing

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  5. Trading

    What Drives An Option's Price?

    The primary drivers of an option’s price are the underlying stock’s current price, the option’s intrinsic value, its time to expiration and volatility.
  6. Trading

    The Basics of Options Profitability

    The adage "know thyself"--and thy risk tolerance, thy underlying, and thy markets--applies to options trading if you want it to do it profitably.
  7. Investing

    Stock Options and Weekly Options

    Stock option are one of the most straightforward option types. Day traders may be particularly interested in weekly options--options listed with only one week to expiry. Weekly options provide ...
  8. Trading

    Options Pricing: A Review Of Basic Terms

    The following is intended as a review of basic option terminology, which can be used as a reference as needed: American Options - An option that can be at any point during the life of the contract. ...
  9. Investing

    The Importance Of Time Value In Options Trading

    Move beyond simply buying calls and puts, and learn how to turn time-value decay into potential profits.
  10. Trading

    How Does a Strangle Work?

    A strangle is the sale or purchase of both a put and call option on the same underlying investment with the same expiration.
RELATED FAQS
  1. What happens when an option expires in money? Do I have to sell the option to make ...

  2. Can an option be exercised on the expiration date?

    The use of options has increased dramatically over the years as a way to profit from or hedge against the volatile movements ... Read Answer >>
  3. When holding an option through expiration date, are you automatically paid any profits, ...

    Holding an option through the expiration date without selling does not automatically guarantee you profits, but it might ... Read Answer >>
  4. Why do options with the same underlying stock and strike prices trade for different ...

    You would think that two options with the same underlying stock and strike prices would trade at the same price, but interestingly ... Read Answer >>
  5. What does it mean to roll a derivative contract?

    Find out more about derivative securities, how to roll forward a derivative contract and what it means when a derivative ... Read Answer >>
  6. What happens when a security reaches its strike price?

    Learn more about the moneyness of stock options and what happens when the underlying security's price reaches the option ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center