Expiration Date (Derivatives)

AAA

DEFINITION of 'Expiration Date (Derivatives)'

The last day that an options or futures contract is valid. When an investor buys an option, the contract gives them the right but not the obligation to buy or sell an asset at a predetermined price, called a strike price, within a given time period, which is on or before the expiration date. If the investor chooses not to exercise that right, the option expires and becomes worthless and the investor loses the money paid to buy the option.

INVESTOPEDIA EXPLAINS 'Expiration Date (Derivatives)'

The expiration date for all listed stock options in the United States is normally the third Friday of the contract month, which is the month when the contract expires. However, when that Friday falls on a holiday, the expiration date is on the Thursday immediately before the third Friday. Once an options or futures contract passes its expiration date, the contract is invalid.

RELATED TERMS
  1. One-Touch Option

    A type of exotic option that gives an investor a payout once ...
  2. Max Pain

    The point at which options expire worthless. The term, max pain, ...
  3. Vertical Spread

    An options trading strategy with which a trader makes a simultaneous ...
  4. Option Cycle

    The expiration dates that apply to the different series of options. ...
  5. Outperformance Option

    An exotic call option that's value is determined by the differing ...
  6. Nearby Month

    In the context of options and futures, the month closest to delivery ...
RELATED FAQS
  1. What options strategies are best suited for investing in the aerospace sector?

    The best options strategies for investing in the aerospace sector exploit the sector's volatility and propensity for big ... Read Full Answer >>
  2. How can I profit from a decline in the drugs sector?

    Profit from a decline in the drugs sector by short selling or by purchasing futures contracts or put options. Investors use ... Read Full Answer >>
  3. How can I profit from a fall in the automotive sector?

    You can profit from a fall in the automotive sector by short selling automotive stocks and exchange-traded funds (ETFs) or ... Read Full Answer >>
  4. How can I profit from a fall in stock prices of companies in the financial services ...

    The financial services sector, made up of investment brokerage houses, credit services companies and asset management firms, ... Read Full Answer >>
  5. How can I profit from a fall in the metals and mining sector?

    Investors profit from a fall in the metals and mining sector by going short on metals or by going long on broader market ... Read Full Answer >>
  6. 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 Full Answer >>
Related Articles
  1. Options & Futures

    Introduction To Single Stock Futures

    These contracts allow for easier shorting, and provide more leverage and flexibility than stocks.
  2. Options & Futures

    Reducing Risk With Options

    If you want to use leverage to your advantage, you must know how many contracts to buy.
  3. Investing Basics

    Get The Most Out Of Employee Stock Options

    These plans can be lucrative for employees - if they know how to avoid unnecessary taxes.
  4. Options & Futures

    How To Avoid Closing Options Below Intrinsic Value

    To get the best return possible on your options trading, it is important to understand how options work and the markets in which they trade.
  5. Options & Futures

    Using Options Instead Of Equity

    Learn how to multiply returns and diversify risk by buying options instead of stock.
  6. Options & Futures

    Make Better Options Trades With The Average Monthly Range

    We'll show you how to use the average monthly trading range to score better returns.
  7. Options & Futures

    Manage Risk With Trailing Stops And Protective Put Options

    Using the right strategy can lower the risk of failure and protect your profits.
  8. Options & Futures

    Evaluating Executive Compensation

    Find out how to determine whether a CEO is being overpaid.
  9. Options & Futures

    Avoid Premature Exercise On Employee Stock Options

    With early exercise, you forfeit some profit back to your employer, and incur income tax to boot.
  10. Options & Futures

    Stock Option Expiration Cycles

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

You May Also Like

Hot Definitions
  1. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  2. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  3. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  4. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  5. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  6. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
Trading Center