What Time of Day Do Options Expire? Key Details You Need to Know

Options traders must be aware of expiration times, as they determine when contracts become worthless or are automatically exercised. Missing these deadlines can lead to unexpected losses or missed opportunities, making it essential to understand exactly when options expire.

Expiration timing isn’t always straightforward, as different factors influence when an option ceases to be valid. Knowing the key details helps traders make informed decisions and avoid last-minute surprises.

Standard Exchange Deadlines

Options listed on U.S. exchanges follow specific expiration schedules. Most standard monthly options expire on the third Friday of the expiration month, with the final trading deadline at 4:00 p.m. Eastern Time (ET), aligning with the stock market close. However, the actual expiration occurs the following day, when clearing firms finalize settlement.

Weekly options also expire on Fridays, with trading ending at 4:00 p.m. ET. Some index options, such as S&P 500 (SPX) contracts, follow a different schedule, expiring at the market open on Friday instead of the close. Their final settlement price is based on the opening prices of the index’s components, which can differ from the previous day’s closing prices.

European-style options, commonly associated with cash-settled indices, have different expiration rules. These contracts do not allow early exercise and typically settle based on a special opening quotation rather than the last traded price. Traders need to understand how these settlement values are calculated, as they can impact profitability.

Influence of Underlying Market Hours

The trading hours of the underlying asset significantly impact options pricing, especially as expiration approaches. Since options derive their value from stocks, ETFs, or indices, price movements in the underlying security directly affect an option’s premium. On expiration day, time value approaches zero, and contracts trade primarily based on intrinsic value.

For stock and ETF options, the regular trading session from 9:30 a.m. to 4:00 p.m. ET is the primary window for price discovery. However, extended hours trading before the market opens and after it closes can create price gaps that influence settlement values. While most options do not trade in after-hours sessions, significant moves in the underlying stock can impact the final settlement price, particularly for in-the-money contracts. This can lead to situations where an option appears profitable at market close but ends up worthless by settlement.

Index options often settle based on the opening prices of their components rather than the closing price. This means traders holding these contracts overnight may be exposed to price swings caused by economic reports, earnings releases, or geopolitical events. These factors can introduce volatility that affects final settlement values, making it important to account for external risks when managing expiring positions.

Early Exercise Impact

Options holders can exercise their contracts before expiration, but doing so is usually only beneficial in specific situations. American-style options allow early exercise, meaning the holder can convert the contract into shares at any point before expiration. However, exercising early forfeits any remaining time value, which is often better captured by selling the contract in the open market.

One common reason for early exercise is to capture an upcoming dividend payout. When a stock goes ex-dividend, its price typically drops by the dividend amount, affecting call option values. If a call option is deep in the money with little time value remaining, exercising before the ex-dividend date allows the holder to receive the dividend as a shareholder. Traders who overlook this risk may find their calls losing value after the stock adjusts downward post-dividend.

Another scenario for early exercise is when an option is deep in the money with minimal extrinsic value. If the bid-ask spread is wide or liquidity is low, selling the contract may not be efficient, making exercise the better alternative. This is particularly relevant for options on less liquid stocks, where exiting a position through the market can result in unfavorable pricing.

Contractual Variations

Options contracts are not always standardized, as corporate actions, contract adjustments, and exchange-specific rules can alter their terms. For example, when a company undergoes a stock split, merger, or special dividend issuance, existing options are adjusted to reflect the new structure. In a 2-for-1 stock split, an investor holding one call option with a $100 strike price would see their contract modified to cover twice as many shares at a $50 strike price. These adjustments maintain the contract’s economic value, but traders must be aware of how such changes affect their positions.

Another key factor is the contract multiplier, which determines how many shares each option controls. Standard equity options typically represent 100 shares per contract, but certain derivative products, such as FLEX options, allow for customized terms, including alternative multipliers, expiration dates, and exercise styles. These customized contracts cater to institutional traders seeking precise hedging strategies, though they require a deeper understanding of contract specifications to manage effectively.