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. Option Series

    A specific set of calls or puts on the same underlying security, ...
  2. Stock Option

    A privilege, sold by one party to another, that gives the buyer ...
  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. Exchange Traded Derivative

    A financial instrument whose value is based on the value of another ...
RELATED FAQS
  1. How can I check to see if an ETF’s price reflects its asset value?

    An investor can check the net asset value (NAV) for an exchange-traded fund (ETF) on the website for the ETF after the market ... Read Full Answer >>
  2. Why would a company issue a rights offering?

    Companies most commonly issue a rights offering to raise additional capital. A company may need extra capital to meet its ... Read Full Answer >>
  3. What is the difference between share purchase rights and options?

    There is a big difference between share purchase rights and options. With share purchase rights, the holder may or may not ... Read Full Answer >>
  4. What is the difference between an option-adjusted spread and a Z-spread in reference ...

    Unlike the Z-spread calculation, the option-adjusted spread takes into account how the embedded option in a bond can change ... Read Full Answer >>
  5. In what ways can a sinking fund affect bond returns?

    The effective yield of a bond sinking fund to an investor should not be considered similar to a bond nonsinking fund. Both ... Read Full Answer >>
  6. Can delta be used to calculate price volatility of an option?

    The delta of an option is a component of the Black-Scholes option pricing formula, which provides the implied volatility ... Read Full Answer >>
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. Mutual Funds & ETFs

    Top 7 ETFs Designed for Retirement Income

    These seven ETFs offer several advantages over traditional ETFs, especially for investors seeking retirement income.
  9. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  10. Chart Advisor

    Commodity Traders are Watching These 3 Charts

    As we head towards the summer months, many commodity traders are looking to diversify their holdings and to protect themselves against inflation.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center