Expiration (expiry, expiration time, expiration date)

What does expiration or expiry mean?

The expiration or expiry of a binary option, call spread, or knock-out is the date and time when the option is settled  into cash.

The expiration value of a contract is calculated using Nadex’s indicative index value methodology, as disclosed in the Nadex Rulebook. For binaries, if the expiration value is greater than the strike price, the binary option settles at 100. This means that buyers of the contract receive the $100 payout, and sellers receive $0.00. If the expiration value is equal to or less than the strike price, the binary option settles at a value of 0. This means the sellers of the contract receive the $100 payout and the buyers receive $0.00. This methodology is slightly different for our event contracts, so we encourage you to review contract specifications in detail before trading.

Derivatives expiration dates

Some investments don’t expire. You can own gold for the rest of your life and pass it on to your heirs. You can own stocks for as long as the company is in business. Most other financial instruments, like futures contracts, options, binary options, call spreads or knock-outs, have an expiration date.

Such derivatives cannot be traded after their expiration. If your prediction is correct, your position is either cash settled, meaning you get some amount of money in exchange for your derivative contract, or the underlying asset is actually made deliverable to you.

Settlement and delivery facts and myths

Options based on futures contracts have expirations, too. If your option expires in-the-money, you may exercise it or it may even be exercised for you and you will then have a futures contract which is approaching a later expiration date.

Contrary to an old myth, you won’t get 40,000 pounds of corn actually delivered to you if you hold a corn futures contract (or corn binary option) until expiration. With the futures contract, you’d get a receipt giving you ownership of some corn in a silo somewhere.

With a Nadex Binary Option, Call Spread or Knock-out, you get cash at expiration. In the case of a binary option, you'll get either $100 or $0 in your Nadex account. When a call spread or a knock-out expires, you'll also receive your profit or loss in the form of a credit or debit to your account balance. All Nadex contracts are cash-settled derivatives.