Option Expiration Dates

Every option has an expiration date: the last day on which it can be traded or exercised. After that, it either converts into a position in the underlying (if exercised) or ceases to exist. Expiration shapes almost everything about an option, including its price, how fast it decays and how sensitive it is to moves in the underlying. The general concept of expiry across markets is in Expiration; this lesson covers how it works for options specifically.

Expiration cycles#

On US exchanges, options on major indices such as the S&P 500 now have expirations every trading day, which has made 0DTE trading popular. Cboe has reported that 0DTE options account for a large share of daily S&P 500 option volume.

Time and premium#

Options lose time value as expiration approaches. The decay is slow far from expiry and speeds up in the final weeks, especially for at the money options. See Theta.

What happens at expiration#

• In the money options are generally exercised automatically. In the US, the Options Clearing Corporation's exercise by exception process exercises equity options that are $0.01 or more in the money at expiration, unless the holder instructs otherwise.
• Out of the money options expire worthless.
• Short option holders who are assigned must deliver or buy the underlying (physically settled options), or pay the cash difference (cash settled options). See Exercise and Assignment.

Physical vs cash settlement#

Some index options settle on a special opening price on expiration morning (AM settled), while others settle on the closing price (PM settled). Check the contract specifications.

Expiration risks#

• Pin risk: when the underlying closes very near the strike, it is unclear whether short options will be assigned. Holders can decide after the close based on after hours moves, leaving sellers uncertain about their positions over the weekend.
• Gamma risk: near expiry, option values change very quickly with small moves. See Gamma.
• After hours moves: news after the close on expiration day can change whether an option is worth exercising.
• Unintended positions: an expiring long call can turn into 100 shares per contract, requiring cash or margin you did not plan for.

Choosing an expiration#

Match the expiration to your thesis: if you think a move will happen within three months, buying a two week option leaves no margin for error.

Triple witching and quarterly expirations#

On the third Friday of March, June, September and December, stock options, index options and index futures expire together, which often brings heavy volume. See Options Expiration and Triple Witching.

Frequently asked questions#

When do options expire?#

Standard US monthly options expire on the third Friday of the month, and many underlyings also have weekly or daily expirations.

What happens if I hold an option until expiration?#

If it is in the money it is usually exercised automatically; if it is out of the money it expires worthless.

What is a 0DTE option?#

An option traded on its expiration day, with zero days to expiration. These are popular on major indices and are very sensitive to small price moves.

Next, learn how exercise style differs between American vs European Options.

Sources#

• Options Clearing Corporation, Options education