Expiration Dates specify the exact future point in time when a derivatives contract, such as a crypto option or future, officially ceases to be valid. After this date, the contract can no longer be exercised or actively traded.
Mechanism
For crypto options, the expiration date dictates the termination of the holder’s right to buy or sell the underlying digital asset at the predetermined strike price. Automated settlement systems process outstanding positions based on the contract’s terms and the underlying asset’s price at the precise expiration time.
Methodology
Traders strategically incorporate expiration dates into their options trading frameworks, as these dates significantly influence option premium values and risk profiles due to time decay. The selection of specific expiration cycles is a critical component in constructing strategies aimed at capitalizing on anticipated market events or volatility regimes.
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