What Is a Broken Date?

Broken date is a term used to describe a nonstandard maturity date for any type of financial deliverable. Broken dates can occur with options, futures, bonds and other trading instruments.

Broken dates may also be referred to as odd dates.

Key Takeaways

  • A broken date refers to any nonstandard maturity date assigned to a financial instrument.
  • For example, if an option typically expires on the third Friday of the contract month, but markets are closed due to a holiday, expiration may take place on the preceding business day, which would be a "broken date."
  • Investors should be aware of possible broken dates because they impact the price of the financial instrument they are trading.

Understanding Broken Dates

A broken date refers to any nonstandard maturity date assigned to a financial instrument. Financial instruments with a specified longevity may sometimes deviate from their final expected maturity date. Deviation may occur due to holidays, weekday schedules or timing that is set by the administrator.

Broken Date Considerations

Broken dates can be important to recognize for liquidity purposes. An entity owning a financial instrument should pay close attention to its actual maturity date, as broken dates may occur and the instrument may not always be delivered on the exact maturity date expected.

In some cases, an issuer may also assign a maturity that does not follow a standardized schedule. Any type of nonstandard maturity can be known as a broken date or odd date. An investor should be aware of the final maturity date and never assume a date based on standardized longevity.

Awareness of the final maturity or expiration date is important for an investor because it affects the trading price. For futures contracts, the delivery date will be the same as the expiration. For options, an investor should be aware of the exact expiration date on an option contract, but they can typically exercise their option for delivery at any time. Bonds are also another common instrument where a broken or odd date may occur.

Many financial instrument contracts are quoted with periods of one month, three months, six months, one year, two years, etc. Just because a period is quoted for a financial instrument does not mean it will mature on that exact time schedule due to business day and other administrative factors.

Broken Date Expiration

An investor who buys a Bitcoin futures contract expects it to terminate trading on the last Friday of the contract month. Maturity at any other date would be considered a broken date or odd date. If a broken date occurs then the contract would settle on the broken expiration date.

Traditional option contracts on the S&P 500 Index expire on the third Friday of the expiration month. If for any reason the contract expires on an alternate date then it would be considered a broken date or odd date.