What Time Do Options Expire?

Generally, the last opportunity to trade a monthly options contract is shortly after market close on the third Friday of the expiration month. This can be a little confusing, however, since the actual time that that an option expires is the next day (Saturday).

The expiration time and expiration date for an options contract are different. While knowing the expiration date is most useful, it can be helpful for traders to be aware of the time that options expire as well.

The Importance of Knowing When Options Expire

Since you can no longer trade an options contract once it has expired, knowing when options expire is super important for all option traders.  

Remember, buying an options contract means you’re buying the right (not the obligation) to buy or sell the assets represented in the contract at a predetermined price and within a set time. 

Once the contract reaches the end of the set time (its expiration date), unless the buyer of the contract chooses to exercise the right, the contract expires and becomes worthless.

For the seller of an option contract this can be a welcomed event since unexercised expired option contracts are the ideal outcome for many option strategies, such as “The Iron Condor Credit Spread”.

But for the buyer of options, an overlooked option expiration can equate to trading losses.  

Do Options Expire at Open or Close?

According to NASDAQ, options technically expire at 11:59 AM Eastern Standard time on the date of expiration, which is a Saturday, oddly enough. Public holders of options contracts, however, must indicate their desire to trade no later than 5:30 PM on the business day preceding the option expiration date.

Most exchange-traded options contracts follow a predetermined expiration system. Equity stock option contracts listed on the US exchange will always expire on the Saturday that follows the third Friday of the month. 

An exception occurs in the case of a market holiday, in which case the expiry is on the Thursday right before Friday.

For holders who need to notify the exchange of their intent to exercise a trade, it is important to know that the notification limits (how late you can notify) vary based on where the product trades. The Chicago Board Options Exchange (CBOE), for example, requires that the trading of expiring options takes place by 3:00 PM (Central) on the third Friday of the expiration month.

Most traders do not hold an options contract until its expiration date; they will move out of the position rather than exercise it or let it expire. Traders should consult their broker regarding expiry, as some brokers will have different notification limits.

When Do Weekly Options Expire?

Weekly options contracts are shorter than regular monthly options. They expire every week, generally at market close on Fridays. Similar to regular options, exceptions include market holidays, in which case the weekly contract option would close on Thursday instead of Friday.

Can Options be Exercised Automatically?

Unless a broker or holder of an options contract has requested otherwise, an options contract will generally “exercise by exception” if it is “in the money” at the time of expiration. An options contract will not be exercised automatically if it is “out of the money” at the expiration time.

What About Index Options?

American-style index options contracts, like equity options, can be exercised any time before expiration, up to and including the third Friday of its expiration month.

Option Expiration For European Vs American Options

Similar to American-style index options, some European-style index contracts expire at the end of the day. Some options expire in the morning, however, so it is important to be aware of this and know your expiry times when trading European-style index options. 

Most monthly index options contracts expire in the morning, while weekly options expire in the afternoon. As with other options contracts, notifications of intent to exercise must be done the day before.

Summary 

Experienced traders have a keen awareness of when the options they have bought or sold will expire. Again, an overlooked option expiration can be a good or a bad thing, depending on whether you’re the option buyer or an option seller.