Options Expiration Date

For anyone interested in trading Options, Option expiration is a very important subject in stock investment that stock traders must understand. 

With is a stock option? an option investor has the right to purchase a stock at a price that has been given. The price given for the stock is called the strike price. The point at which the actual market price is, may not be a concern.

The option value is determined mostly by the relationship between the current market price and the strike price. In a situation where the stock price is above the option strike price, the option is “in the money” and choosing to exercise it will allow you to purchase shares for less than you can get from the regular stock exchange.

But if you have a situation where the stock price is below the strike price, the option is “out of the money”.

Options and Expiration.

For options, when it comes to “expiration” you must clearly understand what it means, there is a difference between expiration date and expiration time. They are both not the same and shouldn’t be considered as such. So, you won’t miss out on anything.

Options Expiration Time.

An expiration time is when an option expires. It is the time of day of the expiration day in which all exercise notice concerning the option must be known.

Options Expiration Day.

The expiration day is the deadline which the holder of the option has to make their intentions known. For options traders, this should be a major focus for them but they can’t neglect the expiration time of the option.

Options Expiry Date.

An expiration date is the last day an option is valid. In the case of a call option, an option will not have any value if the underlying security is not up to the strike price. If this happens, at the point of expiration, the option is worthless and does not exist anymore.

If you have an option which is “in the money”, with expiration drawing near, there are different moves you can make in such a situation. For a marketable option, the “in the money’’ option will be shown in the option’s market price.

You have two options here; you can decide to either sell the option so you can lock in the value or you can decide to exercise the option to buy the shares.

It is important to note that, with your option being “in the money” at expiration, it will automatically be exercised by your broker, and by the following Monday morning, you will have the shares in your brokerage account. But in the case of employee stock options, you must exercise “in the money” options before they expire.

If you hold on to an option through the date of expiry and you don’t sell, you are not automatically guaranteed any profit, but the loss you will incur as a result of this would be limited. Take, for instance, you purchase a call option for a particular stock which is currently trading at $80, a decision will have to be made if the option would be exercised at its expiration date, sold or allowed to expire. If the stock price goes up to $90 and the cost of the option is $2. With a decision to exercise the option, the profit made would be $90 - $80 - $2 = $8

For some types of options, the holder is permitted to exercise the option at some certain times. As in the case of an American-style option, there are no restrictions. Exercising such an option can be at any time, either at the purchase date or at the expiration date.

For a European style option, it can only be exercised at expiration and for Bermuda options, they have specific periods when they are permitted to be exercised.

One can choose to let their options expire, and that is in the case of holding a short position on an option that is out of the money. If you are short a put option that is worth $2, to close that position would cost you $2 plus commission. But if you let the option expire it will cost you just $2. With this, though there was no profit made, the losses were limited.

Options Expiration Calendar.

The last day to trade an option is usually the third Friday of the expiration month, but the expiration time is the Saturday following that particular Friday. Here is a list of the expiration dates for the rest of the year.

Dates when options stop trading: September 18, October 16, November 20, December 18. (All on Friday).

Dates when options expire: September 19, October 17, November 21, December 19. (All on Saturday).

Quarterly expiration: September 30, December 31.