Expiration Date (Derivatives)

The expiration date of a derivative is the date on which the contract expires and the parties involved settle their obligations. For example, if you buy a call option on a stock, the expiration date is the date on which you have the right to buy the stock at the strike price. If you do not exercise the option by the expiration date, it expires worthless.

The expiration date is an important factor to consider when trading derivatives. If you are buying a derivative, you want to make sure that you have enough time to make a profit before the expiration date. If you are selling a derivative, you want to make sure that you are not exposed to too much risk of the underlying asset moving against you before the expiration date.

The expiration date of a derivative can be either fixed or floating. A fixed expiration date is a date that is set in stone when the contract is created. A floating expiration date is a date that is based on the price of the underlying asset. For example, if you buy a call option on a stock with a floating expiration date, the expiration date will be extended if the price of the stock rises.

The expiration date of a derivative can also be American or European. An American option can be exercised at any time before the expiration date. A European option can only be exercised on the expiration date.

The expiration date of a derivative is an important factor to consider when trading these instruments. It is important to understand how the expiration date affects the value of the derivative and to make sure that you are not exposed to too much risk.