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 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. Long-Term Equity Anticipation Securities ...

    Publicly traded options contracts with expiration dates that ...
  4. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) ...
  6. Alternative Energy ETF

    An exchange-traded fund that invests in companies engaged in ...
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. Options & Futures

    How To Sell Put Options To Benefit In Any Market

    Selling a put option is a prudent way to generate additional portfolio income and gain exposure to desired stocks while limiting your capital investment.
  9. Options & Futures

    How To Buy Oil Options

    Crude oil options are the most widely traded energy derivative in the New York Mercantile Exchange.
  10. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  4. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  5. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  6. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center