Options Expiration

All options have a limited useful lifespan and every option contract is defined by an expiration month. The option expiration date is the date on which an options contract becomes invalid and the right to exercise it no longer exists.

When do Options Expire?

For all stock options listed in the United States, the expiration date falls on the third Friday of the expiration month (except when that Friday is also a holiday, in which case it will be brought forward by one day to Thursday).

Expiration Cycles

Stock options can belong to one of three expiration cycles. In the first cycle, the JAJO cycle, the expiration months are the first month of each quarter - January, April, July, October. The second cycle, the FMAN cycle, consists of expiration months Febuary, May, August and November. The expiration months for the third cycle, the MJSD cycle, are March, June, September and December.

At any given time, a minimum of four different expiration months are available for every optionable stock. When stock options first started trading in 1973, the only expiration months available are the months in the expiration cycle assigned to the particular stock.

Later on, as options trading became more popular, this system was modified to cater to investors' demand to use options for shorter term hedging. The modified system ensures that two near-month expiration months will always be available for trading. The next two expiration months further out will still depend on the expiration cycle that was assigned to the stock.

Determining the Expiration Cycle

As there is no set pattern as to which expiration cycle a particular optionable stock is assigned to, the only way to find out is to deduce from the expiration months that are currently available for trading. To do that, just look at the third available expiration month and see which cycle it belongs to. If the third expiration month happens to be January, then use the fourth expiration month to check.

The reason we need to double check January is because LEAPS expire in January and if the stock has LEAPS listed for trading, then that January expiration month is the additional expiration month added for the LEAPS options.

Options Expiration Calendar

• 2009 Options Expiration Calendar