Expiration Date

Every option and futures contract has an expiration date. For an option, it is the deadline for the holder to decide whether to use their right to buy or sell. If an option is not exercised by then, it expires, and, if it is out of the money, becomes worthless.

Options are available with many expiration dates, from a few days to several years ahead. Exchange-traded share options often expire on a standard day each month, with weekly and long-dated options also available in many markets.

The time remaining until expiry strongly affects an option's price. More time gives the underlying asset more opportunity to move favourably, so options with longer expiries usually cost more. As expiry approaches, the time value of an option shrinks, a process called time decay, which speeds up in the final weeks.

For example, an option bought with three months to expiry might lose a large part of its value in the final month if the share price does not move as hoped. Knowing the expiration date and planning around it is essential for anyone trading options.