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Options Expiration

Options Expiration

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Our goal is to make sure you understand the logistics of how the options expiration process works and the parties involved.
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Summary

Regardless if you trade weekly or monthly options you are going to consistently go through expiration each year. That said, you should feel 100% comfortable with the expiration, exercise, and assignment process when you eventually encounter it - because you undoubtedly will if you plan to trade options long-term for income. If you don’t feel confident in the processes or have questions that you just can't seem to get answered, then this section will help you.

Objectives
  • Options expiration basics and the roll of the OCC in options trading.
  • Understanding the different types of expiration settlement.
  • Weekly options expiration timing and mastering the new date "tags".
  • Mastering the entire assignment and exercise process from start to finish.
  • Conceptual discussion about trading duration (timeline) and mini-option contracts.

10 lessons

Options Expiration Explained

Options expiration is the last trading day an option can be exercised or assigned. This video explains options expiration and the probability of early assignment.
6:24

What is the Options Clearing Corporation (OCC)?

The Options Clearing Corporation (OCC) is responsible for listing all options and controls the exercise and assignment process. The OCC provides a liquid market for traders and guarantees all options transactions.
3:18

Physical vs. Cash Settlement Options

It is important to understand the difference between physical and cash settled options. Physical settlement of an options contract is the most common, and involves the actual delivery of the underlying security, like shares of stock. Cash settlement occurs when cash exchanges hands at settlement instead of an underlying security or physical commodity.
5:55

American vs. European Style Options

It is important to understand the difference between American & European-style options. American-style options contracts can be exercised any day on or before the expiration date. European-style options contracts can only be exercised on the expiration date and cannot be assigned early to the option seller. Most index options are European-style options.
4:08

Weekly Options Expiration

Weekly options expiration allow traders the opportunity to trade more frequently and utilize specific short-term strategies. Weekly options typically expire every Friday.
3:08

Weekly Expiration Tags/Codes

Weekly option expirations provide unique opportunities for traders. Learn to use weekly expiration tags/codes to find potential trade opportunities.
4:00

Options Assignment Process

Option assignment is the fulfillment of the contractual obligation of a contract’s terms. This video helps you understand the options assignment process and how it impacts you as a trader.
4:22

Options Exercise Process

Options exercise is the process by which the buyer of an option submits a request to his or her broker to exercise an options contract’s rights. This video helps you understand the options exercise process.
3:29

Trading Timeline (Duration)

In this video we'll discuss the multiple trading time frames you can pick from, as well as some guidelines on trade duration based on current levels of implied volatility.
4:39

Option "Mini" Contracts

Option "mini" contracts are relatively new to the industry and were introduced as a way for investors with smaller accounts to trade more expensive stocks.
2:58
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How long do I have access to the course materials?

Our guided videos are always available to you. There is no membership required, and they're always free to access.

What topics are covered in Option Alpha's courses?

Our free courses include more than 160 videos on options trading. Learn the basics of options and key terms, options pricing, multiple strategies for beginner and advanced traders, trade adjustments, portfolio management, and more. Option Alpha's education is designed to help you understand every aspect of options trading with in-depth, easy-to-follow guided videos.

What course should I start with?

If you're brand new to options trading, you can follow Option Alpha's courses and tracks from Beginner to Intermediate to Advanced for a guided experience. Each course includes multiple videos covering a wide range of subjects that build off the previous lessons.

Who are these courses intended for?

Option Alpha's free education courses and guided tracks are perfect for new traders looking to learn the basic of options trading, as well as experienced traders that want to better understand more advanced options topics.

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Are Option Alpha courses free?

Yes, all our options education is 100% free to access. We believe in giving back and educating traders at all levels and have been blazing this trail by offering free education for more than a decade.

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Kirk Du Plessis
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