how an option cycle works
an option cycle refers to the cycle of months available for a listed option class option cycles are integrated across all of the options and futures markets cycles are regulated by regulatory authorities an investor will typically view available options by option class an option class is a grouping of calls or puts available on a security option classes are separated by calls and puts they are also categorized by strike price and listed sequentially by expiration option cycle assignmentsoptions are assigned to one of three cycles at their listing originally cycles were divided by four months in 1984 regulatory authorities decided that a listed option should have the two front months available for its investors this changed the listing of options to include the first two front months followed by the next two months in the cycle there are three option cycles that a listed option can be assigned to on the public markets note that the options on the january cycle have contracts available in the first month of each quarter january april july and october options assigned to the february cycle use the middle month of each quarter february may august and november options in the march cycle have options available during the last month of each quarter march june september and december investors seeking to invest in an option will find the first two front months followed by the two remaining cycle months this provides the opportunity for investors to trade or hedge for shorter terms as well as buy longer term contracts special considerationsit should be noted that nowadays the cycle is less important for heavily traded stocks and index tracking exchange traded funds because of the publication of weekly options since weekly options are available to be traded an investor that wants to extend their expiration date can roll a quarterly option to any given week of the year it is also important for investors to understand what happens to a cycle when a month passes each cycle will always have the two front months available after a month passes the last two remaining months continue to follow the originally assigned cycle for example in february the cycle one option availability would be february march april july in june the cycle one option availability would be june july october january overall for an investor to understand which cycle an option is trading in it is necessary to look at the third and fourth months generally all options will expire at 4 00 pm eastern time on the third friday of their expiration month less common expiration cyclessome options may have contracts in every month of the year but this is usually reserved for highly liquid underlying securities such as exchange traded funds etfs on the s p 500 and other index funds options such as these are often used to hedge a portfolio and because they represent a basket of stocks the security underlying the option is more stable the strike prices or target prices tend to hold up better as a result so it makes sense to have more and more frequent expiration date possibilities long term equity anticipation securities leaps are options for much longer terms and as such they expire every year in january at least one year after purchase they are otherwise the same as other securities options and are available on thousands of equities and a select group of index funds as either calls or puts the only difference between leaps and regular options is the length of time before they expire 