Every option contract has a specific expiration date, and time. The time of expiration can be either in the morning (a.m.) or in the afternoon (p.m.).
Options that expire at the close of the market are considered p.m. and options that expire the morning of the last trading day are a.m.
The vast majority of options on futures expire at the close of the market on the last trading day, but there are notable exceptions. Options with a.m. expiration are generally written on a future contract that has the same expiration date and time. Futures that are financially settled, meaning they settle to cash payments rather than physical commodities, are often settled using a.m. expiration.
In the case of the S&P500 futures contracts, the final settlement price is determined by the opening prices of all the individual companies that make up the index. This settlement calculation is performed by the index administrator. For the S&P500 indices, the administrator is the Standard and Poor’s Company and they will provide a Special Opening Quote (SOQ), to indicate the final settlement price.
Options on those futures use the SOQ as a fixing price, to determine whether the option will be exercised, by comparing the SOQ to the strike price. For example, if a call option has a strike that is below the SOQ, it will be exercised. By exercising the option, the future will now be purchased at the strike price and on the same day be settled at the more advantageous SOQ price.
Options with a p.m. expiration are calculated using the value of the underlying future at the close of market on the last trading day for the option.
Although most options expire at the end of a trading day, it is important for traders to understand not only the date, but the specific time when their option may expire.