Expiration
In options trading, expiration (or expiry) is the final date on which an option is valid. After the expiration date, the option ceases to exist and can no longer be exercised.
Each option contract has a fixed expiry date. If the holder hasn’t exercised the option by then - or sold it - it will either:
● Expire worthless (if it’s out of the money), or
● Be automatically exercised (if it’s in the money and auto exercise is supported by the broker or trading platform)
Automatic exercise policies can vary by platform and may involve additional costs or tax implications. Investors should check with their provider for specific terms.
Knowing when an option expires is essential to managing the position.
Why expiration matters to investors
Understanding expiration can help investors make informed decisions when trading options. It may support:
● Tracking important deadlines for selling or exercising options
● Avoiding missed deadlines or unintended actions (like auto-exercise)
● Managing risk and timing as part of a broader strategy
● Recognising the time-sensitive nature of all options contracts
The closer an option gets to expiry, the more its time value declines - a key factor that affects its price and usefulness.
However, options are complex financial products and involve significant risk. They are not suitable for all investors.Understanding their mechanics, pricing influences, and the risk of loss is essential before considering trading.