Expiration Date

The date on which an options contract expires — after this date the option is worthless if not exercised, and its time value falls to zero.

Every options contract has a defined expiration date. For US equity options, standard monthly expirations fall on the third Friday of each month. Many stocks and indexes also offer weekly expirations (every Friday), and some have quarterly options. At expiration, the option is either exercised if it's in the money or abandoned if it's out of the money.

Expiration is the deadline that gives time its value. An option expiring in 90 days is worth more than an otherwise identical option expiring in 30 days, because more time means more opportunity for the underlying to move favorably. This time premium decays continuously — slowly at first, then accelerating dramatically in the final weeks. The rate of this decay is measured by theta.

Choosing an expiration involves a tradeoff between time and cost. Shorter expirations generate less premium when selling options (less time value to collect) but represent less obligation duration. Very short expirations — one to two weeks — are called "weeklies." They are popular with retail traders seeking fast outcomes but are also the most susceptible to complete loss, as there is almost no time for the position to recover from an adverse move.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.