en.wikipedia.org/wiki/Expiration_(options)
2 corrections found
For instance, for U.S. exchange-listed equity stock option contracts, the expiration date is always the Saturday that follows the third Friday of the month, unless that Friday is a market holiday, in which case the expiration is on Thursday right before that Friday.
This is outdated. Since February 2015, standard monthly U.S. equity options have expired on the third Friday of the month, not the following Saturday.
Full reasoning
This sentence reflects the pre-February 2015 rule, not the current one.
The Options Industry Council's current educational materials state that most equity options that expire in a given month usually expire on the third Friday of the month and that if a Friday exchange holiday applies, expiration moves to the preceding Thursday. OIC also explicitly notes elsewhere that before February 2015 the standard monthly expiration date was described as the Saturday following the third Friday, but that in February 2015 it became the third Friday of the month.
So the article's statement is not just incomplete; it states the old rule as if it were the current one.
2 sources
- Options Basics | The Options Industry Council
"Most equity options that expire in a given month usually expire on the third Friday of the month... If there is an exchange holiday that falls on a Friday, expiration is then moved to the Thursday immediately preceding this holiday."
- Research | The Options Industry Council
"Please note that studies conducted prior to February 2015 referred to the standard monthly options expiration date as the Saturday following the third Friday of the month. In February 2015, the standard monthly options expiration date became the third Friday of the month."
In the case of options with "automatic exercise", the net value of the option is credited to the long and debited to the short position holders.
Automatic exercise does not always settle by crediting/debiting a cash ‘net value.’ Equity and ETF options are physically settled, while cash debits/credits apply to cash-settled products such as many index options.
Full reasoning
This sentence overgeneralizes how exercise settlement works.
Authoritative exchange/industry sources distinguish between physically settled options and cash-settled options:
- Cboe states that stock and exchange-traded product options have physical settlement at expiration, meaning securities are delivered.
- The Options Industry Council explains that cash-settled options (such as index options) settle entirely in cash, and in that specific case OCC transfers cash between long and short positions.
So a blanket statement that automatically exercised options are settled by crediting the option's net value to longs and debiting shorts is incorrect. That cash-credit/debit description applies to cash-settled options, not to automatically exercised options in general.
2 sources
- Exchange Traded Stock | Cboe
"Please note that these products have physical settlement at expiration (securities are delivered), whereas the index options have cash settlement at expiration..."
- Cash is King: Why Some Options Never Deliver Shares | The Options Industry Council
"Cash-settled options settle entirely into cash, unlike equity and ETF options, which settle through the delivery of shares... OCC transfers cash between long and short positions."