Types of Expiry in Options Trading

Understanding options trading can be complicated, but knowing the fundamentals such as expiry dates can help traders navigate through it with more ease. Expiry dates determine when an options contract will become invalid and are crucial for planning your trading strategy.

There are various weekly, monthly, quarterly, and long-term expiries with distinct advantages and disadvantages. In this article, we’ll explore the various types of expiry in options trading to help you make informed decisions.

Types of Expiry in Options Trading

One of the fundamental concepts in option trading basics is understanding expiry dates. Options trading has different types of expiry as below:

1. Monthly Expiry

Monthly expiry in options trading in India refers to contracts that expire on the last Thursday of every month.

Traders use these monthly expiries to align their strategies with longer-term market movements and trends. The predictability of the monthly expiry date allows for better planning and execution of trades, making it a popular choice among those who prefer a more extended time horizon for their options positions.

This kind of expiration is particularly crucial for managing risk and optimizing returns within the options market.

2. Weekly Expiry

Weekly expiry in options trading refers to contracts that expire on specific days of the week, depending on the index or stock.

For instance, NIFTY options expire every Thursday, BANKNIFTY options every Wednesday, FINNIFTY options every Tuesday, MIDCAP NIFTY options every Monday, SENSEX options every Friday, and BANKEX options every Monday.

This frequent expiry schedule allows traders to capitalize on short-term market movements and volatility thereby allowing more opportunities for trading and hedging.

Weekly expirations are especially popular among active traders who want to exploit rapid market changes since they offer flexibility as well as potential quick gains.

3. Contract Cycles

Contract cycles refer to the different durations for which options contracts are available before they expire.

These cycles are categorized into three types: Near Month, Next Month, and Far Month. Near Month contracts have 30 days or less until expiry, Next Month contracts have 60 days or less, and Far Month contracts have 90 days or less.

This classification allows traders to choose contracts based on their preferred time horizon and risk tolerance.

By offering various contract cycles, the market provides flexibility for both short-term and long-term trading strategies, enabling traders to align their positions with their market outlook and trade goals.

Conclusion

Understanding the different types of expiry in options trading can help you make more informed decisions and align your strategies with your trading goals. Weekly, monthly, and contract Cycles expiries each offer unique advantages and risks, so choose the one that fits your needs best.

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