Expiration Time
Candlefocus EditorThe expiration time is the exact date and time that the derivative contract ceases to trade and any obligations or rights come due or expire. For example, with stock options, the expiry determines whether the option is exercised or allowed to expire worthless or in the case of futures, whether the open contracts will be closed out or not.
Expiry time is often determined by the exchange, or other governing body, on which the derivative is trading and will be specified in the specific derivative contract. The most common expiration date for derivatives is the third Friday of the expiration month. However, some derivatives can expire on certain business days, certain days of the week, certain hours, or certain market closing times.
It is worth noting that options may also be settled prior to the original expiration date in cases such as American options, where the investor has the right to exercise their option anytime prior to expiration. This could occur if the holder of the option chooses to do so, or if the underlying asset experiences a major event prior to expiration.
In any case, the expiration time is an important component of derivative contract trading. Expiration time is the date and time at which derivatives contracts become invalid and any obligations or rights arising from its execution must be settled appropriately. It is imperative that investors fully understand the expiration times associated with derivatives contracts in order to ensure the successful execution of their trades.