What does the expression option mean in
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On or before this day, investors will have already decided what to do with their expiring position. Key Takeaways Expiration date for derivatives is the final date on which the derivative is valid.
- OPTION | meaning in the Cambridge English Dictionary
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- What does option mean?
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After that time, the contract has expired. Depending on the type of derivative, the expiration date can result in different outcomes.
Option owners can choose to exercise the option and realize profits or losses or let it expire worthless. Futures contract owners can choose to roll over the contract to a future date or close their position and take delivery of the asset or commodity.
Basics of Expiration Dates Expiration dates, and what they represent, vary based on the derivative being traded.
Expiration Date (Derivatives)
The expiration date for listed stock options in the United States is normally the third Friday of the contract month or the month that the contract expires. On months that the Friday falls on a holiday, the expiration date is on the Thursday immediately before the third Friday.
Once an options or futures contract passes its expiration date, the contract is invalid. The last day to trade equity options is the Friday prior to expiry. Some options have an automatic exercise provision. If a trader doesn't want the option to be exercised, they must close out or roll the position by the last trading day.
Index options also expire on the third Friday of the month, and this is also the last trading day for American what does the expression option mean in index options. For European style index optionsthe last trading is typically the day before expiration.
There are two types of options, calls and puts.
Calls give the holder the right, but not the obligation, to buy a stock if it reaches a certain strike price by the expiration date. Puts give the holder the right, but not the obligation, to sell a stock if it reaches a certain strike price by the expiration date.
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This is why the expiration date is so important to options traders. The concept of time is at the heart of what gives options their value. After the put or call expires, time value does not exist.
In other words, once the derivative expires the investor does up down binary options retain any rights that go along with owning the call or put. Important The expiration time of an options contract is the date and time when it is rendered null and void.
Here are all the possible meanings and translations of the word option. Princeton's WordNet 0. Stock Exchange A stipulated privilege, given to a party in a time contract, of demanding its fulfillment on any day within a specified limit; also, the contract giving that privelege; as, an option to buy a stock at a given price; to exercise an option.
It is more specific than the expiration date and should not be confused with the last time to trade that option. Expiration and Futures Value Futures are different than options in that even an out of the money futures contract losing position holds value after expiry.
For example, an oil contract represents barrels of oil.
Oxford English and Spanish Dictionary, Thesaurus, and Spanish to English Translator
If a trader holds that contract until expiry, it is because they either want to buy they bought the contract or sell they sold the contract the oil that the contract represents.
Those that don't want to be liable to fulfill the contract must roll or close their positions on or before the last trading day. Futures traders holding the expiring contract must close it on or before expiration, often called the "final trading day," to realize their profit or loss. Retail traders don't typically do this, but businesses do. For example, an oil producer using futures contracts to sell oil can choose to sell their tanker.
Futures traders can also " roll " their position. Article Sources Investopedia requires writers to use primary sources to support their work.
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