Rhiannon Hendricks
When it comes to the financial world, timing is everything. This is especially true when it comes to options trading. Options are contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date. With options expiring every Monday, Wednesday, and Friday, it's important to understand the specifics of mid-week expirations. So, what time do Wednesday options expire, and what implications does this have for traders?
| Characteristics | Values |
|---|---|
| Options | SPY, SPX, NDX |
| Type | European-style |
| Expiry Day | Monday, Wednesday, Friday |
| Expiry Time | 4 p.m. Eastern Time |
| Fixing Price | Special fixing price (NQF) of E-mini Nasdaq-100 future for that day |
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What You'll Learn
SPY options
When an options contract expires, it is no longer valid, and the holder can no longer exercise their right to buy or sell the underlying asset. The expiration date for an options contract is typically set in advance and is known as the expiration date. For SPY options, the expiration date is usually the third Friday of the expiration month, excluding holidays. If the expiration date falls on an exchange holiday, the expiration date will typically be the Thursday before the third Friday.
It's important to note that the expiration times for options contracts can vary depending on the exchange and the specific terms of the contract. For SPY options, the Chicago Board Options Exchange (CBOE) is the primary exchange where these options are traded. The CBOE sets the specific expiration dates and times for SPY options, and this information is available on their website.
As of June 2018, SPY options were among the few options that expired every Monday, Wednesday, and Friday. This information was shared on a Reddit thread discussing options with such expiration frequencies. It is, however, unclear whether this trend has continued beyond the date of the thread's creation.
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SPX options
In the case of a holiday on the settlement date, the settlement date is usually moved back one business day. For instance, if the settlement date falls on a Friday, it will be pushed back to Thursday. However, if the settlement date falls on a Monday, it will be moved forward to Tuesday.
It is important to note that no SPX EOW, Monday Weekly, Tuesday Weekly, Wednesday Weekly, or Thursday Weekly options will be listed with an expiration date that aligns with the expiration of a standard SPX option or an SPX EOM option.
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NDX options
The underlying value of NDX options is equal to the full value of the Nasdaq-100 Index. This means that investing in NDX options provides access to some of the world's most innovative companies and allows investors to capitalize on their performance. NDX options are considered Nasdaq's flagship index options product, and they have contributed to the index's success over the past two decades.
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E-mini Nasdaq-100 futures options
E-mini Nasdaq-100 futures (NQ) offer liquid benchmark contracts to manage exposure to the 100 leading non-financial US large-cap companies that comprise the Nasdaq-100. The E-mini Nasdaq-100 futures contract is $20 times the Nasdaq-100 index and has a minimum tick of 0.25 index points. NQ futures provide a faster, more flexible, and cost-efficient way to harness Nasdaq-100 performance compared to ETFs. They offer nearly 24-hour access, allowing traders to react to off-hour news and overseas events without waiting for the ETF market to open.
The E-mini Nasdaq-100 futures options have weekly expirations on Mondays, Wednesdays, and Fridays, known as European-style options. The Monday and Wednesday options expire at 4:00 PM Eastern Time, based on the special fixing price (NQF) of the E-mini Nasdaq-100 future for that day. The NQF is calculated as the weighted average trading price of the E-mini futures in the last 30 seconds before the cash equity markets close. As European-style options, they cannot be exercised or assigned early and will auto-exercise at expiration, with the clearinghouse automatically exercising in-the-money options.
Trading E-mini Nasdaq-100 futures contracts carries risks similar to those of other futures contracts, such as economic news, earnings reports, changes in interest rates, and investor sentiment. Positive economic data, such as strong GDP growth or declining unemployment rates, can drive prices higher, while negative economic data can lead to a decline in prices as investors become more cautious.
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European-style options
European options define the timeframe when holders of an options contract may exercise their contract rights. The rights of the option holder include buying the underlying asset or selling the underlying asset at the specified contract price, known as the strike price. For example, a European call option gives the owner the right to acquire the underlying security at expiry. For an investor to profit from a call option, the stock's price, at expiry, must trade high enough above the strike price to cover the cost of the option premium. On the other hand, a European put option allows the holder to sell the underlying security at expiry. To make a profit from a put option, the stock's price at expiry must be trading far enough below the strike price to cover the option premium.
European options are typically traded over the counter (OTC), while American options are usually traded on standardized exchanges. Most equity options are American-style options, but many broad-based equity indices have actively traded European-style options, including the S&P 500. Most stocks and exchange-traded funds have American-style options, while equity indices, including the S&P 500, have European-style options.
European index options stop trading one day earlier than American options, at the close of business on the Thursday preceding the third Friday of the expiration month. This lapse in trading allows brokers to price the individual assets of the underlying index. As a result, the settlement price of the option can often come as a surprise, as stocks or other securities may make drastic moves between the Thursday close and the market opening on Friday. It may also take hours after the market opens on Friday for the definite settlement price to be published.
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Frequently asked questions
The Monday and Wednesday options on E-mini Nasdaq-100 futures have a European-style expiration, meaning they will expire at 4 pm Eastern Time.
They are weekly options that provide opportunities to hedge weekend exposure or express views on mid-week economic announcements or earnings events.
European-style options cannot be exercised or assigned early and will auto-exercise at expiration.
