Understanding Options Expiration – Expiration Cycles

All option contracts have a shelf life. That is, they are valid and useful for a certain span of time to a certain date. That date is called the expiry date as mentioned in other pages of this website. On this expiration date, the options contract becomes invalid and no longer useful to a trader. On the options expiration date, the holder of the option no longer has the right to exercise the option.

Why does this matter to you? 

When you are holding onto an option that is nearing its expiration date, you should be certain that a price move in the underlying security would increase the option premium enough for you to sell it at a profit. When an options contract is nearing its expiration date, the there is a significant decline in its time value. Do take note of this. If you are a holder of an options contract that is going to expire soon, the underlying price moves must effect a positive change in the option premium so as to offset the loss in time value. 

When do stock options expire in the US?

Stock options in the United States expire on the third Friday of the expiration month. If the third Friday of the expiration month is a public holiday, the expiration date would be adjusted to the day before. that is, the expiration date becomes Thursday.

3 Fixed Expiration Cycles
                        January                     April                    July                     October
                        February                   May                     August                November
                        March                       June                    September          December
4 Month Interval

There are 3 fixed expiration cycles that you would have to take note of. This information is easily available on many websites.  The first of these cycles is January, April, July, October. Sometimes, it is called the JAJO cycle.

The next expiration cycle is February, May, August and November. This is sometimes called the FMAN cycle.

The next cycle is March, June, September and December. It is sometimes called the MJSD cycle.

Each of these cycles consist of a 4 month interval.

An optionable stock has a minimum of 4 different expiration months.

Expiration months

This is the Lions Gate Entertainment option chain. There are options expiring in November which is the current month, January 2016, March 2016, June 2016 and January 2017. As you can see, this optionable stock has more than 4 expiration months.

Options Calendar for 2015

http://www.marketwatch.com/optionscenter/calendar

Options Calendar for 2016

http://www.marketwatch.com/optionscenter/calendar/2016

Options Calendar for 2017

http://www.marketwatch.com/optionscenter/calendar/2017

Options Calendar for 2018

http://www.marketwatch.com/optionscenter/calendar/2018

Read next : Begin your trading options journey