What Is Expiration Date?
The expiration date is the last day an options contract is valid. Learn what happens at expiration, how time decay works, and why expiration timing matters.
Definition
The expiration date is the last day on which an options contract can be exercised. After this date, the contract becomes worthless if not exercised. U.S. stock options typically expire on the third Friday of the expiration month at market close.
As expiration approaches, options lose time value (theta decay) at an accelerating rate. In the final week, especially the last day, this decay is at its fastest — which is why selling options short-dated can be lucrative but why buying cheap out-of-the-money options near expiration is risky.
Weekly options (expiring every Friday) have become popular for income strategies, while LEAPS (Long-Term Equity Anticipation Securities) offer expirations 1-3 years out for longer-term positioning with slower time decay.
Real-World Example
You buy a call expiring in 30 days. Even if the stock price doesn't move, the option loses value every day due to time decay. By day 25, it may have lost 50%+ of its value simply from time passing — this is theta decay in action.
Why It Matters
Choosing the right expiration is as important as choosing the right strike — too short and time decay destroys your position, too long and you pay more in premium than necessary.
Get Glen’s Updates
Investing insights, new tools, and whatever I’m building this week. Free. No spam.
Unsubscribe anytime. I respect your inbox more than Congress respects property rights.
Frequently Asked Questions
What happens if I don't close my option before expiration?
In-the-money options are typically auto-exercised by your broker — you'll buy or sell 100 shares. Out-of-the-money options simply expire worthless. Most traders close positions before expiration to avoid auto-exercise or unexpected share assignments.
What are weekly options?
Weekly options expire every Friday instead of monthly. They're popular for income strategies like covered calls because they generate premium faster (7 days of theta decay vs 30). But the premium per trade is smaller since there's less time value.
Does expiration month affect the option price?
Yes — longer-dated options cost more because they have more time value. A 90-day option will cost significantly more than a 7-day option at the same strike, all else equal. This extra cost is entirely time value, which decays to zero at expiration.
Related Terms
Recommended Resources
Tools & books I actually use and recommend
SeekingAlpha Premium
Quant ratings, earnings transcripts, and the stock analysis community where I published 300+ articles.
Try SeekingAlphaA Random Walk Down Wall Street
Burton Malkiel's classic case for index investing. The book that convinced millions to stop stock-picking.
View on AmazonThe Little Book of Common Sense Investing
John Bogle's manifesto on why low-cost index funds beat everything else. Straight from the founder of Vanguard.
View on AmazonSome links above are affiliate links. I only recommend products I personally use. See my full disclosures.
Keep Exploring
Options Theta Explained
How time decay erodes option value daily.
Read moreStrategyLEAPS Options Strategy
Long-dated options for position trading.
Read moreGuideHow to Trade Options for Beginners
Full beginner guide including expiration selection.
Read moreHubFinancial Glossary
Browse all 149 financial terms.
Read more