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Mechanics
Expiration Date — Options Trading Term Explained
Definition, formula, and how premium sellers use it.
By Aigars VolRadar·
The last day an option contract can be exercised or traded. Standard US equity options expire on the third Friday (monthlies) or any Friday (weeklies).
Key takeaway
Know your expiration cold. After market close on expiration Friday, ITM options are auto-exercised and OTM options vanish.
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Why It Matters
Everything in options is a countdown to expiration. Theta accelerates, gamma spikes, and pin risk emerges — all driven by the expiration date. Choosing the right expiration is as important as choosing the right strike.
How It Works
Standard monthly options expire on the third Friday of each month (PM settlement). Weekly options expire every Friday. Some products have Monday, Wednesday, and Friday expirations. After market close on expiration day, the OCC auto-exercises all options that are $0.01 or more ITM.
Example
Today is April 10. The May monthly expiration is May 16 (36 DTE). The nearest weekly is April 17 (7 DTE). For a standard premium selling entry at 30-45 DTE, May monthly is the target. The April weekly is too close — gamma is already elevated and theta-to-gamma ratio is unfavorable.
Common Mistakes
Confusing calendar days with trading days. 45 DTE calendar = roughly 32 trading days. Also: forgetting that monthly options stop trading at market close on Friday, but SPX AM-settled options use Thursday's close for the last trading opportunity (settlement is based on Friday's open).
Expiration Date in VolRadar
Frequently Asked Questions
What is Expiration Date?
The last day an option contract can be exercised or traded. Standard US equity options expire on the third Friday (monthlies) or any Friday (weeklies).
Why does Expiration Date matter for premium sellers?
Know your expiration cold. After market close on expiration Friday, ITM options are auto-exercised and OTM options vanish.
How does Expiration Date work?
Standard monthly options expire on the third Friday of each month (PM settlement). Weekly options expire every Friday. Some products have Monday, Wednesday, and Friday expirations. After market close on expiration day, the OCC auto-exercises all options that are $0.01 or more ITM.
What are common mistakes with Expiration Date?
Confusing calendar days with trading days. 45 DTE calendar = roughly 32 trading days. Also: forgetting that monthly options stop trading at market close on Friday, but SPX AM-settled options use Thursday's close for the last trading opportunity (settlement is based on Friday's open).
Related Terms
60/40 Tax Treatment
The favorable tax split for Section 1256 contracts: 60% of gains are taxed at the long-term capital gains rate and 40% at the short-term rate, regardless of ...
Adjusted Option
An option whose terms have been modified due to a corporate action — stock split, special dividend, merger, or spinoff.
All-or-None Order
An order that must fill completely or not at all, but unlike FOK, it can wait in the book for a complete fill rather than canceling immediately.
American-Style Option
An option that can be exercised by its holder at any time from listing until expiration.
The information about Expiration Date above is for educational purposes only and is not financial advice. Read our full investment disclaimer.
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