Pay attention to the Expiration of Options

Jul 9 18:23

When buying an option contract, you are given the right to buy or sell a stock at a specified price.

However, the right doesn't last forever, and the contract becomes obsolete after the expiration date.

An expiration date is the last day that option contracts are valid.

American options can be exercised at any time before the maturity date. European exercise options can be exercised and assigned only at expiration.

As the example below, there are different expiration dates when trading options. The final trading day for an option is commonly the day of expiration.

As the option approaches its expiration date, the option's premium stems mainly from the intrinsic value. At expiration, the owner may exercise the rights or, if the option has no value to the holder, let it expire without exercising it.

Thus, it is important to consider when an option expires.

With all other factors remaining constant, an option that is further away from its expiry date has more time value because the stock price has a longer period to reach its strike price. Hence, it will cost more than the same option that is closer to the expiry date.

Options Investors should consider fully and take different strategies.

This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. Read more

Pay attention to the Expiration of Options

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