Part 6 Institutional Trading

Strike Price and Expiry Date

Every option contract has a strike price and an expiry date—two critical elements defining its value. The strike price determines the level at which the asset can be bought (for calls) or sold (for puts). The expiry date indicates when the contract becomes void. Options lose value as they near expiry—a process called time decay. Traders must balance risk and timing; shorter expirations offer quick profits but higher risk, while longer expirations provide stability at higher cost. Correct strike and expiry selection define successful strategies.