Strikes and expiries
Explain the two numbers that define every option contract — strike price and expiration date.
Lesson path
Options, Risk Math, and Psychology
Options Anatomy
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Explain the two numbers that define every option contract — strike price and expiration date.
Two numbers define every option
Every option contract you'll ever trade has two defining numbers: the strike price and the expiration date. Pick those two, plus whether it's a call or put, and you've fully specified the contract. Everything else — premium, Greeks, payoff — flows from there.
The strike price is the agreed-upon price at which you have the right to buy (call) or sell (put). Strikes are listed in fixed increments — usually $1, $2.50, or $5 apart depending on the stock's price. A $50 stock might have strikes every $1 ($48, $49, $50, $51, $52). A $300 stock might have strikes every $5 ($290, $295, $300, $305). The closer the strike is to the current stock price, the more the option costs.
The expiration date is when the contract dies. US equity options usually expire on Fridays. Liquid names like SPY, QQQ, and big tech stocks have weekly expirations — every Friday for the next several weeks, plus monthly and longer-dated ones. The 'monthly' expiry is the third Friday of each month. Long-dated options that go out a year or more are called LEAPS. Shorter-dated options are cheaper (less time for the stock to move) but also lose value faster as expiry approaches.
How strikes and expiries interact: a $200 AAPL call with a $205 strike expiring tomorrow is dirt cheap (almost no time for the stock to rip $5). The same $205 strike with a six-month expiry costs much more because the stock has plenty of time to move. Same strike, different expiry, vastly different premium. Strike controls how far in or out of the money you are; expiry controls how much time the stock has to get there.
Recap: strike = the price your right kicks in at. Expiry = the date your right runs out. Pick a call or put, a strike, and an expiry, and you've described a specific option contract.
Knowledge check
Answer before moving on.
1. Two AAPL calls have the same $205 strike. Call A expires tomorrow, Call B expires in six months. Which is more expensive and why?
2. What's a 0DTE option?
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