What is Expiration Date (Expiry)?

Options do not last forever.  They expire or terminate; they all have an ending date.

Options are tied to an underlying futures product and all futures products have a settlement date. If the futures contract no longer exists, then clearly an option on that contract can no longer exist either.

When do options expire?

When it comes to options on futures, there may be a variety of option expiration dates you could trade for the same futures contract.

You may find some option expirations align with the expiration of the underlying futures contract. In other cases a futures product could have a variety of shorter term options listed. These shorter term options offer traders greater precision and flexibility to expand their trading strategies.

Expiration Examples

Assume the E-mini S&P 500® futures contract (ES) has a settlement date in June.

Quarterly Options

Quarterly options contracts are offered on the E-mini S&P 500® futures contract. In this case the June quarterly option contract would expire at the same time as the futures contract.

Monthly Options

Monthly contracts are also offered for the same futures product. With a monthly option contract you can express a short term opinion on this longer dated futures contract.

For each listed month, such as May and April, you can trade an option that will expire within a month and settles into the same June ES futures contract. 

Weekly Options

If your time horizon is even shorter, there are weekly options on the E-mini S&P 500 futures contract.

A rolling list of five weekly options that expire each Friday is offered on most products. After each weekly front-end contract expires, another back-end weekly is listed. 

Physically Delivered Commodity Options

When it comes to physically-delivered commodities, option expirations will expire prior to the futures settlement. This happens so that traders have an opportunity to mitigate delivery of the physical product.

For example, when WTI Crude Oil futures settle in June, the WTI option will have a May expiration date. If the option is exercised into the active futures contract, the trader has time to adjust their futures position to either offset the position or make plans to take delivery.

Summary

Options can have a variety of option expiration dates, giving you the flexibility to find a product that meets your trading needs.

For more information on specific option expirations, visit the product specification pages on cmegroup.com.

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