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. Max Pain

    The point at which options expire worthless. The term, max pain, ...
  2. One-Touch Option

    A type of exotic option that gives an investor a payout once ...
  3. Back Month Contract

    A type of futures contract that expires in any month past the ...
  4. Outperformance Option

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

    In the context of options and futures, the month closest to delivery ...
  6. Option Cycle

    The expiration dates that apply to the different series of options. ...
RELATED FAQS
  1. How can I generate a yield from stocks in the Internet sector that do not pay a dividend?

    To generate a yield from stocks in the Internet sector that do not pay dividends, traders can sell call options against their ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
  7. 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

    Solving Mixed Options Problems On The Series 7

    Learn to ace the questions that involve both options contracts and stock positions.

You May Also Like

Hot Definitions
  1. Yield Curve

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

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

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center