When Do Bitcoin Options Expire? Timing, Dates, and Reasoning

BTC Options Expiry Date & Time

The cryptocurrency market is continuously developing. The number of crypto traders, most of whom come from the stock market, is also growing. But the cryptocurrency market is extremely volatile, creating a necessity for traders in tools for hedging (reducing) risks or making speculative income.

Fortunately, the cryptocurrency market is adopting the traditional financial instruments, including options. Cryptocurrency options have different expiration dates, depending on a particular exchange. Just as on traditional markets, the farther out the trading option's expiration date, the more expensive and potentially profitable the option will be.

Key Takeaways

• Bitcoin options are contracts giving you the right to buy or sell Bitcoin at a set date and price.
• The time frame for crypto options contracts vary and play a major role in determining the premium price.
• Rolling is a term used to describe closing a current position or unwanted position and opening a new one.
• The American Options and European-style Options are the two option types as considering options expiration.
• Unlike Bitcoin Options, Equity Options (stock options) are not cash-settled and the last day to trade them is the friday before expiry date.

Options on Bitcoin Futures

Cryptocurrency options differ not only in the expiration dates but also in underlying assets. Trade Options on futures are probably one of the most complex financial instruments.

On the largest North American financial derivatives market, the Chicago Mercantile Exchange (CME) offers unique CME options on Bitcoin futures. They give the buyer of a call (buy) or put (sell) option contract the right to buy/sell a Bitcoin futures contract at a specified strike price at some future date.

With all their diversity, cryptocurrency options share the same technical and conceptual characteristics, which will discuss below.

What Is an Options Contract?

An option is a financial contract between two parties. The option holder/ option trader has the right, but not the obligation, to buy or sell a certain amount of the underlying asset at the strike price (strike price) before a certain date (the option expiration date).

The seller of the option undertakes to buy or sell the asset at the request of the option holder. At the time of the purchase of the contract, the seller receives a certain amount of money — the so-called premium.

Just as the holder has the right to choose whether to exercise the option or not, the seller is obliged to fulfill the terms of the contract at the request of the holder.

The type of the underlying asset, expiration date, strike price are set at the issuance of the contract and cannot be changed any time later.

Understanding Contract Expirations

In simple words, the expiration date is the time the circulation of specific contracts on the market stops. The option is no longer valid after it expires. However, the buyer has a right to exercise the option at any time before the expiration. Longer term expirations like yearly expiry or quarterly expiry in the crypto market usually carry costlier premium than the shorter-term premiums (weekly options, monthly options) due to the increased possibility of hitting its strike price.

The actual expiration time is predetermined according to the exchange calendar. Depending on the length of validity, there are weekly, monthly, and quarterly options. The due date may vary, but usually, the last trading day also falls between the 15th and 20th of the month.

The settlement of the options on expiration day depends on the type of contract:

• vanilla (BTC options)
• margined (options on BTC futures)

With vanilla options, the buyer immediately pays the premium to the seller. The option's holder does not incur any other expenses until the contract expires or is sold. As the contract ends, the buyer receives either the underlying asset or profit from a change in the price of the option.

For margined options, the premium is not paid at once. Interim settlements are made daily during clearing sessions. At the time of the expiration of the contract, the parties transfer only the balance to each other.

At the same time, each option on BTC futures expires on the expiration date of the underlying futures contract.

What Time Do Bitcoin Options Expire?

Bitcoin options expire at different times depending on the exchange and market. Let's take Bitcoin futures option traded on CME. In-the-money options (cryptocurrency options that have a positive intrinsic value) are automatically exercised into expiring cash-settled futures, which settle to the CME CF Bitcoin Reference Rate (BRR) at 4:00 p.m. London's time on the last Friday of the contract month.

Understanding Strike Prices

The strike price is the price fixed in the option at which the buyer of a call option can buy (or sell, if it is a put option) the underlying asset. In turn, the seller of the contract is obliged to sell or buy the underlying asset at any time before the option's expiration.

Why Expiry on Bitcoin Options Can Create Tensions

Close to the expiration period of options, the volatility on the market increases greatly. Although, this can be because there is no extended expiration dates on options, the following extra factors have a significant impact on the prices:

• Pressure from major market players;
• The volume of derivatives and their ratio with underlying assets;
• Distribution of assets among market participants.

All this provokes unpredictable fluctuations in the market. The development of prices will depend on who wins, buyers or sellers.

Summary

Options on Bitcoin are quite complex financial instruments that significantly impact the BTC price, especially during the expiration period. CME Group's options on Bitcoin futures allow traders to use multiple trading strategy “options” to manage Bitcoin's price risk.

FAQ

Are Options on Bitcoin Futures Available for Trading 24/7?

Options and options on futures are traded 24/7 on the CME platform and popular cryptocurrency exchanges.

At What Time BTC Options Expire?

Options expiration times vary among the markets. On CME Group, at the time of writing, options on BTC futures are automatically exercised at the time of expiration of cash-settled futures, at 16:00 London time on the last Friday of the contract month.

What Time Do Bitcoin Options Expire on Friday?

Speaking of future options, unlike regular market hours, Bitcoin contracts positions expire on CME at 16:00 London time on the last Friday of every month.

What Happens When Bitcoin Contracts Expire?

On the day the options are exercised, there is a cash settlement between the parties to the transaction (without delivery of the goods) or a write-off and delivery of the assets.

Why I Can't Buy Options on Expiry Day?

It is possible to buy options on the expiry day. The options are due at the time the market closes on the expiration day. However, some brokerage firms might restrict the purchases in the last two days of the expiry if the contract can become due to the physical settlement.

*This communication is intended as strictly informational, and nothing herein constitutes an offer or a recommendation to buy, sell, or retain any specific product, security or investment, or to utilise or refrain from utilising any particular service. The use of the products and services referred to herein may be subject to certain limitations in specific jurisdictions. This communication does not constitute and shall under no circumstances be deemed to constitute investment advice. This communication is not intended to constitute a public offering of securities within the meaning of any applicable legislation.