DEFINITION of 'Option Cycle'
The expiration dates that apply to the different series of options. An option cycle is the pattern of months in which options contracts expire. The cycles apply to stock and index options, as well as commodity, currency and debt instrument options. There are three common option cycles:
JAJO - January, April, July and October
FMAN - February, May, August and November
MJSD - March, June, September and December
Note that the options on the January cycle have contracts available in the first month of each quarter (January, April, July and October). Options assigned to the February cycle use the middle month of each quarter (February, May, August and November). And options in the March cycle have options available during the last month of each quarter (March, June, September and December).
BREAKING DOWN 'Option Cycle'
In addition to the January, February and March option cycles, individual stock and index options typically also expire in the current month (now) and the subsequent month (next month). This provides the opportunity for investors to trade or hedge for shorter terms. For example, assume options for stock ABC trade on the March cycle. If it is now June, there would be listed June and July contracts (the current and subsequent months), as well as September and December contracts. Because stock and index options have contracts for the current and next month, one cannot tell the cycle by looking at the first two months; rather, it is necessary to look at the third and fourth months to determine if it is on the January, February or March cycle.