Trading Options on Expiration Day

Generally, options expire when it reaches its strike price or on the set expiration date. After all, options and futures are unique instruments that exist for a set period of time. The expiration date of these contracts refers to the calendar time and date when the instrument stops trading.

In most cases, it’s the last Friday of the set expiration date and time. But can you trade options on expiration day? Well, once the expiry date and time reach, the stock becomes invalid, which means you can’t trade it, and if it’s in money, then you make a profit. For more on trading options on expiration day and what is options expiration, please read on.

What time do options expire on expiration day?

The options expiration time of options is usually 11:59 am EST on the third Saturday of the expiring month. If it’s a 3 months option, then it will expire on the third Saturday of the expiring month. Don’t confuse the last day for trading an option with the expiration date.

The last trading date is the third Friday of the option’s expiring month. That is the last day when the market is open before the expiring date. And if the last Friday falls on a holiday, then the last trading day is on Thursday.

On the last day, the options become void, and you can’t trade them. Therefore, the system will automatically clear, or you can have it settled in person.

Understanding Options Expiration

You should never mistake the expiration date for the expiration time. The expiration date refers to the final date you’ll be allowed to practice the stipulated option. Therefore, the broker must receive the exercise notice before the expiration date to be effective.

The expiration date and time can be different when you go through a brokerage firm. It can range between 30 minutes to a few hours to grant the broker more time to execute your request. The difference between the two will depend on the set rules and the broker.

Fortunately, these contracts rarely reach the options expiration day. After all, traders tend to close their position before they expire. But can you sell options on expiration day? For more, please read on.

Can you sell options on expiration date?

Yes, the holders of both American and European contracts can execute them on the expiration date. Unfortunately, the European options can only be exercised on the expiration date. On the other hand, the American options can be exercised on any date between when purchased to the expiring date.

Therefore, a trader can exercise the contract on its expiration date. The OCC (Options Clearing Corporation) sets the expiration date. Unfortunately, some firms have an earlier expiration time than the one set by the OCC. This gives the broker more time to get the option holder and have it settled.

Trading SPX Options on Expiration Day

Unlike the SPXW, the SPX options expiration date is usually a day before the expiration date. Therefore, the SPX options settles when the trading time starts on the day before the expiration day. Like normal stocks, traders can execute these options on the third Friday of every month, while they trade the SPXW options between Monday and Friday.

Since there will use Thursday’s closing day price, you should expect some overnight activities that can have a positive or negative effect on your option. Therefore, it’s crucial that you trade an American-style option before the expiration date.

But with the European style option, you can trade it on the expiration date. And on the expiration date, you won’t have to exchange properties or assets for the option. Instead, you’ll receive cash if it’s still in the money. If it’s out of money, then it cancels automatically.

Trading SPY Options on Expiration Day: Tips and Strategies

If it is AM-settled and expires when the market opens on Friday of the last day, then you should close the trade before the expiration date. Remember, overnight activity can have negative or positive effects. So if possible, try and close your position before the stock options expiration date.


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