Expiration cycle

Expiration cycle

The recurring cycle of expiry months for which options on a particular security can be available. Basic options are placed in one of three cycles; Cycle 1 (the January/April/July/October, or the first month of each quarter); Cycle 2 (the second month of each quarter); or Cycle 3 (the third month of each quarter).
At any one time, a basic option has contracts with three expiration dates outstanding. For example, in mid-February, options trading on cycle 3 will have March, June and September expiries available. Late in March, after the March options expire, a December contract will be added, thus offering June, September and December expiries.
Higher-volume equity options, index options, and LEAPS can trade on other cycles, such as Cycle 4, Cycle 5 or Cycle 6. Cycle 4, for example, offers options in the two nearest months plus two months from Cycle 3. For example, in mid-April, there would be April, May, June and September expires available. A month later, there would be May, June, September and December expiries available for trading.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Expiration Cycle

The period of time during which an option contract is valid. Most options that trade on an exchange belong to one of three expiration cycles. The January cycle expires in the first month of each quarter, the February cycle expires in the second month, and the March cycle expires in the third month. It is also called the option cycle.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

expiration cycle

The dates on which options on a particular underlying security are scheduled to expire. Options other than LEAPS are assigned one of three cycles, January, February, or March. At any time options with four expiration dates will trade, the two near months and two later months. For example, in early March options on ExxonMobil shares had expiration dates of March, April, July, and October.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Expiration cycle.

Equity and index options expire on a predictable four-month schedule, two of which are determined by the expiration cycle to which the underlying instrument has been randomly assigned and two by when you purchase the option.

There are three expiration cycles, one beginning in January, one in February, and one in March. Each cycle includes four months, and an option always expires in two of those months. The other two expiration months are the month in which it is purchased and the following month.

For example, if you purchase an option on an equity assigned to Cycle 1, which includes January, April, July, and October, between January 1 and the third Friday in January you have a choice of contracts expiring in January and in February -- because they are the current month and the following one -- or in April or July -- because they are the next two months in Cycle 1.

Similarly, if you purchased an option on the same equity in April, you'd also have a choice of four expiration dates: April and May -- the current and following months -- and then July and October, the next two months in Cycle 1.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
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