Option Cycle

AAA

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).

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Option

    A financial derivative that represents a contract sold by one ...
  2. FMAN

    One of the three regular option cycles; represents the months ...
  3. Expiration Time

    A specified time, after which the options contract is no longer ...
  4. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  5. JAJO

    An acronym that represents the months of January, April, July ...
  6. MJSD

    An acronym that represents the months March, June, September ...
Related Articles
  1. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  2. Options & Futures

    The Ins And Outs Of Selling Options

    Selling options can seem intimidating but with these tips, you can enter the market with confidence.
  3. Options & Futures

    Stock Option Expiration Cycles

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

    Top Brokers Offering Tools For Covered Calls

    Here are the brokers that offer the best tools for investors and traders to write covered calls and covered puts.
  5. Economics

    Effects of OIS Discounting for Derivative Traders

    The use of OIS discounting has important implications for derivative valuations and could positively or negatively impact a trader's profit or loss.
  6. Options & Futures

    The Perks of Trading Coffee Options

    As more people begin to trade coffee, we explain how coffee options work, who uses them, what drives valuations, and the risks and rewards.
  7. Trading Strategies

    Top Day Trading Instruments

    Day trading is an intense and often appealing activity. Investopedia provides the list of top financial instruments for day trading.
  8. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  9. Options & Futures

    The Fancy Way To Diversify Your Portfolio: Precious Metal Options

    A guide with strategies on how to invest or trade in precious metals by using options.
  10. Options & Futures

    When And How To Take Profits On Options

    Here are the different criteria to ensure maximum profit taking while trading options.

You May Also Like

Hot Definitions
  1. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  2. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  3. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  4. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  5. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
  6. Currency Carry Trade

    A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase ...
Trading Center