Non-Standard Expirations & Adjusted Options
Non-Standard Expiring Options
Non-standard expiring options
What are non-standard expiring options?
"Standard" expiring options at Schwab are classified as options that expire on the Saturday following the third Friday of the month, and have a lifespan of months or years. These have been the norm in the industry for many years. However, options on certain stocks, ETFs, ETNs and indices are now available with short term expirations (weekly expiring options) and calendar quarter end expirations (quarterly expiring options.) These are being referred to as "Non-Standard Expiring Options".
What are the types of non-standard expiring options?
Schwab currently has two broad categories of non-standard expiring options available for trading:
- Weekly expiring options
- Quarterly expiring options
Weekly expiring options
Many weekly expiring options expire on Fridays, except during the expiration week for regular options (the third Friday of each month). However, there are a small number of weeklies that expire on Mondays or Wednesdays.
Weekly expiring options may provide traders with more flexibility when assessing targeted trading opportunities.
Not all stocks, ETFs nor indices trade weekly expiring options—the number is currently limited. You can get the most updated list from the Options Clearing Corporation.
Quarterly expiring options
Quarterly expiring options expire on the last business day of the following calendar quarter ending months: March, June, September, and December. These options are generally created as far as 6 quarters in advance of their expiration, and their last trading day is typically on the day they expire.
Quarterly expiring options may provide traders the ability to align their trading strategies to the calendar or business ending quarters.
What are adjusted options?
Adjusted options are created as a result of a significant corporate event on the option's underlying stock, such as a stock split, merger, acquisition, special dividend, spin-off, or reverse split. After one of these events, the option is altered to reflect the changes.
Options are adjusted by adjusting the underlying terms so the buyer or seller will see no change in the valuation of the option due to the corporate action.
Options are also adjusted to ensure that the overall equity or obligation of an option contract remains intact after a significant corporate action or activity.
How can I tell if an option has been adjusted?
When an option seems much too cheap or too expensive, it may be adjusted. There are several ways to help identify an adjusted option:
- There are two different option symbols with the same month and strike price.
- The abbreviation "ADJ" appears anywhere within the option description.
- A numeric digit "1", "2", etc. is added as a suffix to the underlying stock symbol. E.g. "XYZ1 01/21/2012 25.00 C"
Frequently Asked Questions
Adjustments made to options are often complex. We encourage you to read the Frequently Asked Questions Schwab has created to find out more. If you have additional questions, please contact us at 877-594-6324.
Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the options disclosure document titled Characteristics and Risks of Standardized Options.