Expiry Day
Also called: expiry, expiry day, F&O expiry, settlement day, last trading day.
How it is read
Expiry concentrates several effects that are mild at other times. The expiring series has almost no time value left. Time value is the part of a premium that pays for the days still to run. Premiums near the money can then swing sharply on a small move. Open interest drains out of the expiring series in the sessions before it. Much of it turns up in the next series. That is because positions are rolled forward. For stock derivatives, a position left open into expiry becomes an obligation. The holder must deliver the shares, or take them in. That is a different kind of exposure. It is not the same as the premium that was paid.
What it does not tell you
Expiry schedules are set by the exchange. They have been revised more than once. The weekday on which weekly contracts expire has changed too. So any remembered rule should be checked against the current circular. An expiry that would fall on a trading holiday is moved. It usually moves to the trading day before. The exchange announces that move in advance. Nothing about the date itself predicts direction. The date is a rule about contracts. It changes the mechanics of a position. It does not change how the market behaves.
See it in an experiment
Market X-Ray: Expiry — Move an example settlement value through a strike and see intrinsic value, time value and holiday adjustment.
Related concepts
Expiry Theta Trap: How Option Premium Decays
Theta is time decay: an option's premium erodes as expiry approaches, faster when the underlying sits still.
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