Expiration
The date an options contract ceases to exist.
Also called: expiry · expiration date · dte
In plain language
After expiration the contract is gone. In-the-money options are typically exercised automatically; everything else expires worthless.
Time remaining is a core input to an option’s value. As expiration approaches, extrinsic value decays toward zero, and the decay accelerates in the final weeks.
Near expiration options become extremely sensitive: small moves in the underlying produce large percentage swings in the option price.
Why it matters
Options are the rare instrument where being right too late is identical to being wrong. Expiration puts a hard deadline on your thesis.
Common mistakes
- Buying short-dated options for a thesis that needs weeks to develop.
- Holding through expiration week and being surprised by accelerating decay.
- Forgetting that automatic exercise can create an unwanted stock position.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
How much value an option loses per day purely from the passage of time.
The part of an option’s premium beyond intrinsic value, reflecting time and volatility.
The price paid for an options contract.
When an option seller is required to fulfill the contract’s obligation.
The total number of option contracts currently outstanding at a given strike.