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. Back Month Contract

    A type of futures contract that expires in any month past the ...
  2. Vertical Spread

    An options trading strategy with which a trader makes a simultaneous ...
  3. Must Be Filled - MBF

    A must be filled (MBF) order is a trade that must be executed ...
  4. Outperformance Option

    An exotic call option that's value is determined by the differing ...
  5. Expiration Cycle

    The calendar cycle of expiration months that is assigned to basic ...
  6. Termination Date

    The day on which a swap contract becomes invalid and no further ...
RELATED FAQS
  1. 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 ...
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. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  2. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  3. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  4. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  5. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
  6. Irrevocable Trust

    A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets ...
Trading Center