expiration date
The date on which an options contract expires and becomes void if not exercised. After this date, the option has no value.
Example
“With the option expiration date in two weeks, time decay was rapidly eroding the option's value.”
Memory Tip
EXPIRATION date = option's death date. Use it or lose it by this date.
Why It Matters
Understanding expiration dates is crucial for options traders because it directly impacts the time value of their investment. Missing an expiration date means losing the entire investment with no opportunity to recover, making deadline awareness essential for protecting your capital and avoiding costly mistakes.
Common Misconception
Many people believe that an option automatically converts to the underlying stock or asset if not exercised by the expiration date. In reality, the option simply becomes worthless and disappears entirely, which is why traders must actively decide whether to exercise, sell, or abandon their position before the deadline arrives.
In Practice
Suppose you purchase a call option on Apple stock with a strike price of 150 dollars that expires on March 15th. If Apple stock reaches 160 dollars but you forget to exercise the option before March 15th closes, your option becomes void and worthless, and you lose your entire premium paid regardless of how profitable the trade could have been.
Etymology
EXPIRATION (coming to an end) DATE (specific day). The DATE the contract EXPIRES.
Common Misspellings
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See Also
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