When Can You Trade Options? Hours, Holidays, and Expiration

Options are financial contracts that grant the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specific date. These versatile instruments can be used for speculation, income generation, or hedging existing investments. Understanding the precise timing of when options can be traded, when markets are closed, and when these contracts ultimately expire is important for anyone considering their use.

Standard Trading Hours for Options

For most individual stock and exchange-traded fund (ETF) options in the U.S., the standard trading hours align with those of the major U.S. stock exchanges. These hours run from 9:30 AM to 4:00 PM Eastern Time (ET), Monday through Friday. This 6.5-hour window represents the period of highest liquidity and offers the tightest bid-ask spreads, making it the most active time for options trading.

Unlike stocks, which may trade pre-market or after-hours, almost all individual stock options are limited to these regular market hours. Trading outside this window is generally not possible for most equity options due to reduced liquidity and the absence of real-time pricing mechanisms. While some specific index options or certain ETF options might have slightly extended hours, allowing trading until 4:15 PM ET, these are exceptions to the general rule for individual stock options.

Brokerage Account Approval for Options Trading

Before an individual can begin trading options, specific approval from a brokerage firm is necessary, which goes beyond simply opening a standard investment account. Brokerage firms implement an approval process to ensure clients understand the inherent risks involved with options. This process assesses an applicant’s suitability for options trading, considering their financial situation, investment experience, and objectives.

During the application, a brokerage firm requests detailed information about an individual’s investment experience, including their trading history and general investing knowledge. Applicants are also asked about their financial situation, including annual income, liquid assets, and total net worth. Applicants must also specify their investment objectives, such as capital preservation, income generation, growth, or speculation. This comprehensive data helps the brokerage determine an appropriate level of options trading approval.

Brokerage firms categorize options trading privileges into different “levels,” with each level permitting increasingly complex and potentially riskier strategies. While the exact terminology and number of levels vary, a common structure includes levels one to four. Level 1 typically allows for strategies with defined risk, like covered calls and cash-secured puts.

Higher levels, such as Level 2, may permit buying calls and puts, while Level 3 often includes spread strategies involving multiple options contracts. The most advanced levels, often Level 4, may authorize strategies like selling uncovered (naked) options, which carry significantly higher risk. Brokerages use these levels to manage risk for both the client and the firm, ensuring individuals are approved only for strategies consistent with their demonstrated experience and financial capacity.

Market Holidays and Early Closures

U.S. options markets observe the same holiday schedule as the major U.S. stock exchanges, meaning trading is not possible on these designated days. These closures typically align with federal holidays observed throughout the year. If a holiday falls on a weekend, the market closure may be observed on the preceding Friday or the following Monday.

Common market holidays include:
New Year’s Day
Martin Luther King, Jr. Day
Presidents’ Day
Good Friday
Memorial Day
Juneteenth National Independence Day
Independence Day
Labor Day
Thanksgiving Day
Christmas Day

In addition to full-day closures, U.S. options markets may also experience early closures on specific days. These often occur the day before certain holidays, such as the day before Independence Day, the day after Thanksgiving, or Christmas Eve. On these early closure days, options trading typically concludes at 1:00 PM ET. Market participants should consult the official holiday calendars published by exchanges like the NYSE and Nasdaq each year for the precise dates and times of these closures and reduced trading hours.

Trading Deadlines Before Option Expiration

Most standard equity options are designed to expire on the third Friday of the contract month. This date is a deadline for options traders, as it marks the final day these contracts can be actively traded. While the underlying stock market remains open until 4:00 PM ET on a typical trading day, trading for most standard equity options ceases at 4:00 PM ET on their expiration day. This means that any open option positions must be closed or exercised by this time, otherwise, they will be subject to the expiration process.

It is important to distinguish between the cessation of trading and the actual expiration or settlement process. Although trading stops on Friday afternoon, the official expiration for U.S. exchange-listed equity options is the Saturday following the third Friday of the month. If the third Friday falls on a market holiday, the expiration date shifts to the Thursday immediately preceding that Friday. While weekly options or specific index options might have different expiration days or times, the 4:00 PM ET trading cessation on Friday for standard equity options is a widely observed rule.