Expiration Date
The last date on which an option or futures contract can be exercised or traded before it becomes void.
The expiration date is the final day on which a derivative contract remains valid. After this date, the contract ceases to exist and any rights or obligations expire. For options, the holder must decide whether to exercise before expiration. For futures, the contract settles in cash or requires physical delivery. Traders must be aware of expiration dates to avoid unwanted settlement or loss of premium.
How It Works
- Options lose time value as expiration approaches (time decay / theta)
- In-the-money options may be automatically exercised by the broker at expiration
- Futures traders must roll into the next contract before expiry to maintain a position
- Forex options expiring at major levels can influence spot prices as dealers hedge near expiration
Trading Tips
Keep a calendar of option and futures expiration dates, as these create increased volatility
Time decay accelerates in the final weeks before expiration
Watch for large forex option expiries at the 10am New York cut, as they can act as magnets for price
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