What time do options expire?

[Adam777]

Cash settlement eliminates the risk of early exercise and pin risk. You never have to worry about whether or not you will be assigned. This can be a big plus, although if you are long these options you won't have the opportunity to exercise early or after hours on expiration.

I was more looking at if there is an opportunity of buying cheap otm options at the option close, then rely on the underlying to push them into the money (or not) and just rely on automatic assignment. I’m still trying to understand the rules.

I'm not sure if there's a time gap between option close and expiration

 

[FSU]

I was more looking at if there is an opportunity of buying cheap otm options at the option close, then rely on the underlying to push them into the money (or not) and just rely on automatic assignment. I’m still trying to understand the rules.

I'm not sure if there's a time gap between option close and expiration

I actually posted about this some time ago. I felt that the slightly out of the money options were being under priced (in the SPX) a few minutes before the close and the risk/reward was very good to buy them. I don't think that has been the case in awhile though.

In these extreme volatility times, the opposite seems to be true. Friday options were bid in the SPX around 20 points out of the money with around 30 seconds lefts. A lot of edge there in selling, but limited profits.

 

[Adam777]

I actually posted about this some time ago. I felt that the slightly out of the money options were being under priced (in the SPX) a few minutes before the close and the risk/reward was very good to buy them. I don't think that has been the case in awhile though.

In these extreme volatility times, the opposite seems to be true. Friday options were bid in the SPX around 20 points out of the money with around 30 seconds lefts. A lot of edge there in selling, but limited profits.

Found your post.

Is there any time gap between the 3pm spx weekly option close and expiration? ... or is this only for equity options?

 

[ajacobson]

I believe your confusing exercise time cutoffs with expiration. Expiration is, generally, the day after trading stops. Can you trade it ? No. but actual exercise cutoff and expiration are different.

 

[FSU]

Found your post.

Is there any time gap between the 3pm spx weekly option close and expiration? ... or is this only for equity options?

Its not that they are weekly options, its that all SPX options are cash settled. Whatever the final closing price of the index is (or morning settlement price for monthly AM SPX) is what the options are worth. There is no advantage of exercising based on after hours movement in a cash settled index (except OEX which is American exercise)

Note that on expiration, the weekly expiring options stop trading at 3pm ct while all other SPX options will continue to trade until 315.

 

[FSU]

Expiration is, generally, the day after trading stops. Can you trade it ? No. but actual exercise cutoff and expiration are different.

Expiration is no longer the day after trading stops It is now the same day. All exercises and assignments are now processed and results are given to the firms by the OCC sometime before midnight Friday (or Wed/Monday for weeklies).

Gone are the days of coming in Saturday to deal with out trades after expiration, which was a fun tradition.

 

[ajacobson]

We disagree. Saturday is still available for disaster and to reconcile mistakes.

 

[FSU]

We disagree. Saturday is still available for disaster and to reconcile mistakes.

I get my assignment information just after midnight on Friday. The OCC has already processed the information and sent out results before Saturday. This is now the standard practice. There may be a very rare situation were this is briefly delayed, but by Saturday it is done. Options no longer expire on Saturday which used to be the case many years ago.

I think this is a situation where you are wrong, not that we disagree. Suggest you contact the OCC yourself.

Edited to add,

Here is a copy of my recent email to the OCC to clarify,

Thank you for contacting us at the OCC. Exchange cutoff time for exercise (and contra-exercise) notices are 90 minutes after the close. Your brokerage firm will likely have an earlier cutoff time so it’s best to discuss their specific policy with them.


As to when OCC processes those exercises, there is no specific time other than prior to 11:59 PM EST when the contract technically expires.


Regards,

 

[FSU]

Well, just to make it "crystal clear" for you. The holder of a long option will have until Friday at 430pm et in order to decide whether to exercise or not (or 430pm et on Wed or Monday for weekly expirations). This is the OCC cutoff time, so most brokers will have an earlier cutoff time in order to make the OCC deadline. My broker has a 415pm deadline.

Just because your option goes in the money after hours, doesn't mean the hold will exercise.

Exercises are then processed by the OCC and firms are notified sometime before midnight on Friday.

On rare occasions, if there are some type of systems issues, etc, the OCC may extend this deadline for a very short period of time.

I agree with you that is always good to close out your short options to reduce this risk at expiration.

Too late to edit, just to update, I confused CT and ET in this thread. I meant to say the OCC cutoff time is 430pm ct and 530 pm et. (1hour 30 mins after the close). If the markets close early these times would be adjusted.