# Understanding Expiration Time in Options Contracts: Key Facts and Examples

![Expiration Time: The date and time a derivatives contracts ceases to trade and any obligations or rights come due or expire.](https://www.investopedia.com/thmb/-eH6LawmmjjpCgPDts_rVuPjLWQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Expiration-time_final-6d1b5ab7e8734503bf3e70e52de01750.png)

*— Investopedia / Michela Buttignol*

## What Is Expiration Time?

The expiration time of an [options contract](https://www.investopedia.com/terms/o/optionscontract.asp) or other derivative is the exact date and time when the instrument's value can no longer be changed and all trader obligations must be settled. Options that expire out of the money (OTM) become worthless, while in-the-money (ITM) ones are assessed based on the [settlement price](https://www.investopedia.com/terms/s/settlementprice.asp) at expiry.

The expiration time is more specific than the [expiration date](https://www.investopedia.com/terms/e/expirationdate.asp) and should not be confused with the last time to trade that option.

### Key Takeaways

*   Expiration time is distinct from expiration date; it specifies when derivatives contracts cease to trade and obligations must be settled.  
    
*   Options that are in the money (ITM) at expiration retain value based on settlement price, while out-of-the-money (OTM) options become worthless.  
    
*   In the U.S., the standard expiration day for listed stock options is typically the third Friday of the expiration month, barring holidays, after which option contracts expire.  
    
*   Traders must be cautious about the time difference between last trading time and expiration time, as after-hours trading can affect options’ in-the-money status.  
    
*   SPXW Weekly Options on indices like the S&P 500 settle based on the last reported sales price of each component stock on the last trading day.

## How Expiration Time Affects Your Options Trading

Expiration time differs from the expiration date in that the former is when the option actually expires while the latter is the deadline for the holder of the option to make their intentions known. Most option traders need only be concerned with the expiration date but it is [useful to know the expiration time](https://www.investopedia.com/zero-days-to-expiration-0dte-options-and-how-do-they-work-6753832) as well.

According to [NASDAQ](https://www.investopedia.com/terms/n/nasdaq.asp), the expiration time is:

> The time of day by which all exercise notices must be received on the expiration date. Technically, the expiration time is currently 11:59 a.m. \[Eastern Time\] on the expiration date, but public holders of option contracts must indicate their desire to exercise no later than 5:30 p.m. \[Eastern Time\] on the business day preceding the expiration date.  

Since many public holders of options deal with [brokers](https://www.investopedia.com/terms/b/broker.asp), they face different expiration times. In the U.S., the last day to trade an option is typically the third Friday of the expiration month, while the [expiration date](https://www.investopedia.com/terms/e/expirationdate.asp) is the Saturday immediately afterwards. If Friday is a public holiday, the last trading day will be on Thursday.

Public option holders must usually declare their exercise notice by 5:30 p.m. Friday. This time frame will allow the broker to notify the [exchange](https://www.investopedia.com/terms/e/exchange.asp) of the holders' intent by the actual expiration time on Saturday.

> **Important**
>
> Notification limits depend on the exchange where the product is traded. For example, the Chicago Board Options Exchange (CBOE) limits trading on expiring options to 3:00 p.m. Central Time on the last trading day.

## Navigating Derivatives Contract Expirations

An expiration date in [derivatives](https://www.investopedia.com/terms/d/derivative.asp) is the last day that an options or futures contract is valid. When investors buy options, the contracts give them the right, but not the obligation, to buy or sell the assets at a predetermined price, known as the [strike price](https://www.investopedia.com/terms/s/strikeprice.asp).

The exercising of the option must be within a given period, which is on or before the expiration date. If an investor chooses not to exercise that right, the option expires and becomes worthless, and the investor loses the money paid to buy it.

The expiration date for listed stock options in the United States is usually the third Friday of the contract month, which is the month when the contract expires. However, when that Friday falls on a holiday, the expiration date is on the Thursday immediately before the third Friday. Once an options or futures contract [passes the expiration date](https://www.investopedia.com/ask/answers/09/option-expiration-date-profits.asp), the contract is invalid. The last day to trade [equity](https://www.investopedia.com/terms/e/equity.asp) options is the Friday before expiry.

## Important Considerations When Options Expire

While the majority of [options](https://www.investopedia.com/terms/o/option.asp) never reach their expiration dates due to traders offsetting or closing their positions before that time, some options do live on until their actual expiration times. This delay can create interesting dynamics because the last time for trading can be before the expiration time.

This time difference is not a problem when the [underlying security](https://www.investopedia.com/terms/u/underlying-security.asp) also closes for trading at the same time. However, if the underlying security does trade beyond the close of trading for the option, both buyers and sellers might find that the exercise of their contract is automatic if they were [ITM](https://www.investopedia.com/terms/i/inthemoney.asp). Conversely, they may expect the automatic exercise, but after-hours trading in the underlying asset may push them [OTM](https://www.investopedia.com/terms/o/outofthemoney.asp).

Rules about when the final price of the underlying is recorded can change. So, traders should check with both the exchange where their options trade, as well as the [brokerage](https://www.investopedia.com/terms/b/brokerage-company.asp) handling their account.

## Case Study: Understanding SPXW Weekly Options

SPXW are [weekly expiration](https://www.investopedia.com/articles/optioninvestor/11/intro-weekly-options.asp) cycle options on the [S&P 500 Index](https://www.investopedia.com/terms/s/sp500.asp) listed by the CBOE. SPXW Weeklys are settled on the last trading day, typically a Friday for SPXW EOW Weeklys.

As with other afternoon-settled index options, the exercise-settlement value is calculated using the last (closing) reported sales price in the primary market of each component stock. On the last trading day, trading in expiring SPXW Weeklys closes at 3:00 p.m. Central Standard Time (CST). All non-expiring SPXW Weeklys, meanwhile, continue to trade until 3:15 p.m. CST.

> **Article Sources**
>
> 1.  NASDAQ. "[Expiration Time](https://www.nasdaq.com/glossary/e/expiration-time#:~:text=The%20time%20of%20day%20by,day%20preceding%20the%20expiration%20date.)."
>     
> 2.  NASDAQ. "[Expiration Date](https://www.nasdaq.com/glossary/e/expiration-date)."
>     
> 3.  Cboe Exchange, Inc. "[Hours & Holidays](https://certification.cboe.com/about/hours/us-futures/)."
>     
> 4.  CME Group. "[Understanding Listings and Expirations](https://www.cmegroup.com/education/courses/micro-e-mini-options/understanding-listings-and-expirations.html)."
>     
> 5.  Cboe Exchange, Inc. "[S&P 500 Index Options](https://cdn.cboe.com/resources/spx/spx-fact-sheet.pdf)," Page 2.