Expiration Dates

Introduction to Expiration Dates

You’ve probably seen expiration dates on products when you are shopping in a store. Food often has an expiration date associated with it; after it expires, it is no longer safe to eat. If you have ever purchased an insurance policy, you will also be familiar with expiration dates. When you purchase insurance, you pay a premium to protect something that you own in case damage occurs to it. However, insurance is only valid for a certain period of time. After that date, your current policy will no longer be valid, and you will need to renew or purchase a new policy. Once the insurance policy has passed its expiration date, you can no longer make a claim against that policy. When you renew or purchase a new policy, there will be a new expiration date associated with it.

Simply put, an expiration date is a date after which something is no longer valid. While stocks don’t have expiration dates or expiries associated with them, options do. Let’s take a deeper look into this concept.

What is an expiration date?

Unlike traditional assets, options have finite lifespans that are determined by their contract terms. When you are looking to purchase an option or future, you will be able to select from a range of expiration dates. After the expiration date passes, the option or futures contract no longer exists, so you will no longer be able to trade it. For index options, expirations occur weekly, and for options on individual stocks, expirations occur monthly.

This is important to understand because if you own a financial product like options that has an expiration date, there is a chance that this product could be worthless after the expiration date.

Do all options have the same expiration date?

All options have an expiration date, which is the last day that the option can be exercised. The expiration date is the same for calls and puts as long as they have the same expiration date. An option is a standardized contract with specifications like the expiration date being determined by the exchange on which the option is traded. However, different underlying assets will have different expiration dates. Expiration dates typically fall into weekly, monthly, quarterly, and semi-annual periods. Weekly option contracts expire each week, while monthly contracts expire at the end of a month. Similarly, quarterly and semi-annual contracts expire at the end of their respective time periods.

• On the NSE, options on individual stocks have monthly lifespans with expiration dates falling on the last Thursday of the month. If the last Thursday is a trading holiday, the expiry is on the previous trading day.
• NSE Nifty 50 Index options have weekly, monthly, quarterly, and semi-annual lifespans with expiration dates falling on the last Thursday of their lifespans.
• NSE Nifty Bank Index options have weekly, monthly, and quarterly lifespans. For the weekly contracts, the expiration is on Wednesday, while for monthly and quarterly contracts, the expiration date is on the last Thursday of the contract period.
• NSE Nifty Financial Service Index options have weekly and monthly lifespans with the expiration date falling on the last Tuesday of the contract period.
• NSE Nifty Midcap Select Index options have weekly and monthly lifespans with the expiration date falling on the last Monday of the contract period.
• The BSE Sensex and BSE Bankex have weekly, monthly, quarterly, and semi-annual lifespans that expire on the last Friday of the period.