An Options Cycle refers to the standardized schedule of expiration dates for exchange-traded options contracts. These cycles determine when specific option series become available for trading and when they cease to exist, influencing trading strategies, liquidity, and pricing. In institutional crypto options trading, understanding the options cycle is fundamental for managing position rollovers, hedging time horizons, and executing calendar spreads effectively.
Mechanism
Options contracts are typically grouped into quarterly or monthly cycles, with specific expiration dates, usually the third Friday of the month. This mechanism ensures a predictable rhythm for option availability and settlement. For crypto options, while some platforms offer weekly or even daily expirations, the underlying principle of recurring expiration periods remains central to market structure and participant behavior.
Methodology
Traders employ knowledge of the options cycle to align their strategies with upcoming expirations, manage gamma exposure, and capitalize on time decay. Methodologies include rolling positions forward to maintain exposure, structuring trades to profit from predictable drops in time value, or exploiting anomalies around expiration events. In RFQ crypto options, institutional participants factor options cycles into their risk management and algorithmic trading models.
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