Expiration Date (Derivatives)

What is an 'Expiration Date (Derivatives)'

An expiration Date in derivatives is 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.

BREAKING DOWN '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.

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RELATED FAQS
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    Find out more about derivative securities, how to roll forward a derivative contract and what it means when a derivative ... Read Answer >>
  2. 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 >>
  3. What happens when an option expires in money? Do I have to sell the option to make ...

  4. 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 >>
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