Series 3: 4.2.1.3.3. Expiration

4.2.1.3.3. Expiration

An option is said to expire when it is out of the money and the buyer lets the option go to term (expiration date) without ever exercising it. The investor might be willing to liquidate it, but if the option is out of the money, and there is little or no time left before expiration for the price to turn around, there will be no market for it. The option will expire, and no money will change hands. The writer who received the premium will keep it, and the option buyer must accept the loss of his premium.

The last day of trading for any equity or equity index option is generally the third Thursday of the expiration month. Settlement occurs the next day, Friday (T + 1), which is also the expiration date.

The last trading day for futures options contracts and the expiration date generally occur o