Expiration Definition

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

Such derivatives cannot be traded after their expiration. 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.

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.

Options 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.

With a Nadex binary option or spread, you get cash at expiration, either $100 or $0. All Nadex contracts are cash-settled derivatives.  

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