Monthly options expiration has been the foundation of options trading since the first exchanges opened. While weekly options have grown in popularity, monthly expirations still carry the most open interest and liquidity for many stocks. Understanding the monthly cycle is essential for any options trader.
When Do Monthly Options Expire?
Standard monthly equity options expire on the third Friday of each month. If the third Friday is a market holiday, expiration moves to the Thursday before. This consistent schedule makes planning straightforward.
Important Note: While trading ends at 4:00 PM Eastern on expiration Friday, the actual expiration and exercise determination happens after market hours. After-hours stock movement can still affect whether options are exercised.
The Traditional Expiration Cycles
Historically, stocks were assigned to one of three expiration cycles, determining which months had options available.
January Cycle (JAJO)
Stocks in the January cycle have options expiring in January, April, July, and October. Companies like Apple, Amazon, and Google follow this cycle.
February Cycle (FMAN)
The February cycle includes February, May, August, and November. Microsoft and many industrial stocks use this cycle.
March Cycle (MJSD)
March cycle options expire in March, June, September, and December. This cycle includes many financial stocks.
How Cycles Work Today
While the traditional cycles still exist, modern options chains are more flexible. Most actively traded stocks now have:
- The current month options
- Next month options
- Options for two additional months from their assigned cycle
- Weekly options for the next several weeks
- LEAPS for one to two years out
Why Monthly Expiration Matters
Monthly expiration dates are significant for several reasons that affect your trading.
Highest Open Interest
Monthly expirations typically have the most open interest and trading volume. This means tighter bid-ask spreads and easier execution. For less liquid stocks, monthly options may be the only viable choice.
OpEx Effects
Options expiration, often called "OpEx," can create predictable market behavior. The week of monthly expiration sometimes sees increased volatility as market makers and institutional traders adjust their hedges.
Max Pain Theory
Some traders believe stocks tend to gravitate toward the price where the most options expire worthless, called "max pain." While controversial, this theory acknowledges the influence of options positioning on stock prices.
Trading Strategies for Monthly Options
Monthly options support a wide range of trading strategies.
Swing Trading with Monthly Options
If you expect a stock to move over the next two to four weeks, monthly options provide enough time without excessive premium cost. Buy options with 30 to 45 days until expiration for the best balance of cost and time.
Selling Premium
The 30 to 45 day timeframe is ideal for premium sellers. This period captures accelerating time decay while still allowing time to manage positions if they move against you.
Monthly Credit Spread Example
XYZ is trading at $100 on March 1st. April monthly options expire on April 18th (47 days away).
- Sell the April $95 put for $2.00
- Buy the April $90 put for $0.80
- Net credit: $1.20
- Max risk: $3.80 ($5 spread width minus $1.20 credit)
- If XYZ stays above $95 through expiration, you keep the full $1.20
Calendar Spreads
Monthly options work well for calendar spreads where you sell near-term options and buy longer-term options. The monthly cycle provides natural reference points for structuring these trades.
The Monthly Expiration Week
The week leading up to monthly expiration has unique characteristics.
Monday through Wednesday
Time decay accelerates as expiration approaches. Options traders actively adjust positions. Volume often increases compared to non-expiration weeks.
Thursday
The day before expiration sees heightened activity as traders finalize their decisions. If you plan to roll positions, Thursday is often the last practical day to do so.
Expiration Friday
Maximum gamma exposure makes at-the-money options extremely sensitive to stock movement. Pin risk is highest. Many traders avoid holding positions into Friday unless they have specific reasons.
Differences from Weekly Expiration
Understanding how monthly differs from weekly expiration helps you choose the right tool.
- Time decay: Monthly options decay slower than weeklies, giving trades more room to work
- Premium cost: Monthly options cost more due to additional time value
- Liquidity: Monthly options often have better liquidity than weeklies, especially for smaller stocks
- Management time: Monthly positions require less frequent monitoring than weeklies
Rolling Monthly Options
Rolling is the process of closing a current position and opening a new one with a later expiration. Monthly options provide natural roll points.
Common rolling scenarios:
- Roll for credit: Close losing short position and open new one further out, collecting additional premium
- Roll to lock in gains: Close winning long position and open new one to maintain exposure
- Roll and adjust strike: Move to a different strike price while extending time
The monthly cycle makes it easy to plan rolls. For example, if you sold April options, you might roll to May options with about two weeks remaining in the April contract.
Quarterly Expirations
In addition to regular monthly expirations, some products have quarterly expirations at the end of March, June, September, and December. These coincide with fiscal quarters and are popular for hedging and institutional trading.
Index options like SPX have quarterly options that expire on the last trading day of each quarter. These are separate from the regular monthly options that expire on the third Friday.
Track Your Monthly Expirations
Pro Trader Dashboard organizes your options positions by expiration date. See which positions are approaching expiration and plan your management strategy in advance.
Summary
Monthly options expiration follows a predictable third-Friday schedule that has been the backbone of options trading for decades. While weekly options offer more flexibility, monthly expirations provide better liquidity, lower costs per day of theta, and more manageable time decay for most trading strategies. Understanding the monthly cycle and its effects on the market helps you trade more effectively and choose the right expiration for each position.
Compare timeframes with our guides on weekly options trading and LEAPS options.