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Expiration Date

In short

The date after which the option contract is no longer valid

Options have a use-by date. After expiration, they're worthless unless exercised. Shorter expirations are cheaper but give you less time to be right. Longer expirations (LEAPS) cost more but give the trade more time to work.

Option expiration can be weekly, monthly, or quarterly (LEAPS up to 2 years). Time decay (theta) accelerates near expiration. Weekly options have high gamma — small moves cause big profit/loss swings. Monthly expiration is the third Friday of each month.

Related concepts

  • Theta — Options are like ice cubes that melt over time. Theta measures how fast value evaporates daily. An option with theta of -$0.05 loses $5 per day per contract, all else equal. Time is your enemy as an option buyer.
  • Strike Price — The strike price is the agreed price in the option contract. For a call, you can buy the stock at the strike. For a put, you can sell at the strike. Choose your strike based on how big a move you expect.
  • Implied Volatility — Implied volatility is the market's guess about how much a stock will move. High IV means expensive options (the market expects big moves). Low IV means cheap options. Buy options when IV is low, sell when IV is high.
  • Covered Call — You own 100 shares of Apple and sell someone the right to buy them at $200. They pay you $5 per share ($500). If Apple stays below $200, you keep the $500. If it rises above $200, you sell your shares at that price.