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In trading, the contract expiration date is the date when a futures or options contract expires and is no longer valid. In other words, it is the final day on which the contract can be exercised or settled, and all open positions in financial markets must be closed before the expiration date. It is vital that a trader understands when their contracts expire, as it will impact the cost of their contract and the trading strategy they wish to use.
In the case of futures trading, the expiration date of a futures contract is the last day on which the holder takes delivery of the underlying asset or makes a cash settlement. In the case of options trading, the expiration date of an options contract is the last day on which the holder can exercise their right to buy or sell the underlying asset.
The expiration date of a contract can have a significant impact on its price. The closer a contract’s expiration, the more volatile its price becomes. This is because the closer to the expiration date, the more likely it is that a contract will be exercised or settled. This can lead to changes in supply and demand dynamics in financial markets.
For example, a trader holds a call option contract with a strike price of $30. The contract is set to expire in three weeks, and the underlying asset’s price is currently at $35.
The trader may decide to exercise the option and purchase the underlying asset at $30 before the contract expires, which will drive up the demand for the asset and increase its price. However, if the trader does not decide to exercise the option, the option expires and becomes worthless. This decreases the demand for the underlying asset and decreases its price.
Time value also affects how an option contract is priced. The closer a contract is to its expiration date, the lower its time value becomes, which can impact its price.
ADSS offers a range of global markets for traders, with opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC – S.P.C (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates under First Category: Dealing in Securities and Fifth category: Arrangement and advice (Introduction). ADSS is a Limited Liability Company – Sole Proprietorship Company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
