Expiration Date

Notice that the pizza coupon also has an

expiration

date

. You can use this coupon at any time up to and

including the expiration date. Equity options (options on

stock) always expire on the third Friday of the expiration

month. Technically speaking, equity options expire on

Saturday following the third Friday but that is really for

clearing purposes. That extra day (Saturday) gives the

OCC (Options Clearing Corporation) time to match buyers and sellers while the

contract is still legally “alive.” From a practical standpoint though, the last day to

close or to exercise your option is the third Friday of the expiration month. After

that, it’s no longer valid. So just because you may read that options expire on

Saturday, don’t think you can get up Saturday morning and call your broker with

exercise instructions – it’s too late. The third Friday of the expiration month is your

last

day (not the only day) to close or exercise the option. (If Friday is a holiday, the

last trading day will usually be the preceding Thursday.)

Although a pizza storeowner may allow you to turn in an expired coupon,

there’s no such thing with the options market. The second that option expires, it’s

gone for good. There are some index options, such as options covering the S&P

500 Index that expire on the third Thursday of the expiration month. However,

we will only be discussing equity options in this book, so whenever we talk about

the expiration date, we will always be referring to the third Friday of the expiration

month unless otherwise stated.