Expiration date

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Expiration date

The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the third Friday of the expiration month; brokerage firms may set an earlier deadline for notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.

Expiration Date

The date by which an option contract is abandoned and becomes worthless unless it is exercised. In an option contract, the holder has the right, but not the obligation, to buy or sell (depending on the type of option) the underlying asset within a certain period of time. The expiration date is the time at which the holder will lose the right to exercise the option. A European option can only be exercised on the expiration date, while an American option can be exercised at any point prior to the expiration date.

expiration date

The last day on which an option holder may exercise an option. This date is stated in the contract at the time the option is written.

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 date.

The expiration date is the day on which an options contract expires and becomes worthless. Listed options always expire on the Saturday following the third Friday of their expiration month.

For example, if you hold an American-style September equity option, you can exercise it any time before the end of trading on the third Friday in September, or whatever cutoff time your brokerage firm sets. In contrast, European-style options can be exercised only at expiration, usually on Friday.

Under specific circumstances, listed options will be exercised automatically at expiration unless the owner gives instructions not to exercise them.

Unlike the standard term of a listed option, the expiration date of an over-the-counter option is negotiated at the time of the trade.

References in periodicals archive ?

The spot price of the underlying asset is that of oil, the volatility of the underlying asset is that of oil, the strike price is the full cost per barrel and the time to expiration is that of each option.

Cinema industry: Usefulness of the real options approach for valuation purpose

Table 6 shows that the MAPE of RMEL is much less than 10% for the ITM and DITM cases but basically increases with time to expiration. Second, from Tables 5 and 6, based on the MPE, IBM calls are overall underpriced by the RMEL method as are IBM puts, with the exception of the case of ITM and short term to expiration.

Pricing American options using a nonparametric entropy approach

Comparison of investment opportunity and call option Real options Financial options Investment opportunity Variable Call option Current value of cash flows S Current stock price Investment expenditure X Exercise stock price Possible time of decision to T-t Time to expiration defer date Time value of money R Riskless return rate Uncertainty of future cash [[sigma].sup.2] Variance of returns on flows stock

Real options used in natural resource investments

For our example, the time to expiration is two years.

Strategic financial decision making is key to project support. (Nuts and Bolts of Business)

[TTEXPIRY.sub.jt] = the time to expiration for option j on day t, expressed in years, and

The impact of equity option expirations on the prices of non-expiring options

To the extent these assumptions are not satisfied, the true value of the call option component could deviate from the calculated value.(8) However, Chen and Sears |5~ report that the Black-Scholes option pricing model produced satisfactory results when used to value the call option component of SPINs, whose initial time to expiration is close to the SIGNs' initial time to expiration.

Interpreting SIGNs

In reality, the time to expiration of a land-use conversion option associated with a given tract might approach [infinity].

Option-pricing and timberland's land-use conversion option

S&P 500 futures fell 4.3 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Stock futures tumble ahead of CPI, initial claims US data

S&P 500 futures fell 4 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Futures dip on Europe, Japan growth data

S and P 500 futures fell 0.5 point but were just above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

WORLD STOCK EXCHANGES

At a current price of $113, a call option on XYZ with a $100 strike price has an intrinsic value of $13 per share (current market price of $113 less strike price of $100).3 This is the intrinsic value regardless of the time to expiration. An option that has intrinsic value is known as being "in the money," and the intrinsic value will vary based on the strike price.

Chapter 36 Asset pricing models

Current stock price $50 Option exercise price $50 Risk-free interest rate 6.5% Time to expiration (in years) 6 Expected volatility of stock 30% Expected dividend yield 1.5%

Stock-based compensation: estimating option values

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