Why do some expiration dates have more open interest for options?
"The third Friday of each month is an expiration for the monthly options on each stock.  Stock with standardized options are in one of three ""cycles"" and have four open months at any give time.  See http://www.investopedia.com/terms/o/optioncycle.asp In addition some stocks have weekly options now.  Those generally have less interest because they are necessarily short-term.  Anything expiring on April 8 and 22 (Fridays this year but not third Fridays of the month) are weeklies. The monthly options are open for longer periods of time so they attract more interest over the time that they are open.  They also potentially attract a different type of investor due to their length of term, although, as it gets close to their expiration date they may start to behave more like weeklies."
"The answer to the question, can I exercise the option right away? depends on the exercise style of the particular option contract you are talking about. If it's an American-style exercise, you can exercise at any moment until the expiration date. If it's an European-style exercise, you can only exercise at the expiration date. According to the CME Group website on the FOPs on Gold futures, it's an American-style exercise (always make sure to double check this - especially in the Options on Futures world, there are quite a few that are European style): http://www.cmegroup.com/trading/metals/precious/gold_contractSpecs_options.html?optionProductId=192#optionProductId=192 So, if you wanted to, the answer is: yes, you can exercise those contracts before expiration. But a very important question you should ask is: should you? Option prices are composed of 2 parts: intrinsic value, and extrinsic value. Intrinsic value is defined as by how much the option is in the money. That is, for Calls, it's how much the strike is below the current underlying price; and for Puts, it's how much the strike is above the current underlying price. Extrinsic value is whatever amount you have to add to the intrinsic value, to get the actual price the option is trading at the market. Note that there's no negative intrinsic value. It's either a positive number, or 0. When the intrinsic value is 0, all the value of the option is extrinsic value. The reason why options have extrinsic value is because they give the buyer a right, and the seller, an obligation. Ie, the seller is assuming risk. Traders are only willing to assume obligations/risks, and give others a right, if they get paid for that. The amount they get paid for that is the extrinsic value. In the scenario you described, underlying price is 1347, call strike is 1350. Whatever amount you have paid for that option is extrinsic value (because the strike of the call is above the underlying price, so intrinsic = 0, intrinsic + extrinsic = value of the option, by definition). Now, in your scenario, gold prices went up to 1355. Now your call option is ""in the money"", that is, the strike of your call option is below the gold price. That necessarily means that your call option has intrinsic value. You can easily calculate how much: it has exactly $5 intrinsic value (1355 - 1350, undelrying price - strike). But that contract still has some ""risk"" associated to it for the seller: so it necessarily still have some extrinsic value as well. So, the option that you bought for, let's say, $2.30, could now be worth something like $6.90 ($5 + a hypothetical $1.90 in extrinsic value). In your question, you mentioned exercising the option and then making a profit there. Well, if you do that, you exercise your options, get some gold futures immediately paying $1350 for them (your strike), and then you can sell them in the market for $1355. So, you make $5 there (multiplied by the contract multiplier). BUT your profit is not $5. Here's why: remember that you had to buy that option? You paid some money for that. In this hypothetical example, you payed $2.30 to buy the option. So you actually made only $5 - $2.30 = $2.70 profit! On the other hand, you could just have sold the option: you'd then make money by selling something that you bought for $2.30 that's now worth $6.90. This will give you a higher profit! In this case, if those numbers were real, you'd make $6.90 - $2.30 = $4.60 profit, waaaay more than $2.70 profit! Here's the interesting part: did you notice exactly how much more profit you'd have by selling the option back to the market, instead of exercising it and selling the gold contracts? Exactly $1.90. Do you remember this number? That's the extrinsic value, and it's not a coincidence. By exercising an option, you immediately give up all the extrinsic value it has. You are going to convert all the extrinsic value into $0. So that's why it's not optimal to exercise the contract. Also, many brokers usually charge you much more commissions and fees to exercise an option than to buy/sell options, so there's that as well! Always remember: when you exercise an option contract, you immediately give up all the extrinsic value it has. So it's never optimal to do an early exercise of option contracts and individual, retail investors. (institutional investors doing HFT might be able to spot price discrepancies and make money doing arbitrage; but retail investors don't have the low commissions and the technology required to make money out of that!) Might also be interesting to think about the other side of this: have you noticed how, in the example above, the option started with $2.30 of extrinsic value, and then it had less, $1.90 only? That's really how options work: as the market changes, extrinsic value changes, and as time goes by, extrinsic value usually decreases. Other factors might increase it (like, more fear in the market usually bring the option prices up), but the passage of time alone will decrease it. So options that you buy will naturally decrease some value over time. The closer you are to expiration, the faster it's going to lose value, which kind of makes intuitive sense. For instance, compare an option with 90 days to expiration (DTE) to another with 10 DTE. One day later, the first option still has 89 DTE (almost the same as 90 DTE), but the other has 9 DTE - it relatively much closer to the expiration than the day before. So it will decay faster. Option buyers can protect their investment from time decay by buying longer dated options, which decay slower! edit: just thought about adding one final thought here. Probabilities. The strategy that you describe in your question is basically going long an OTM call. This is an extremely bullish position, with low probability of making money. Basically, for you to make money, you need two things: you need to be right on direction, and you need to be right on time. In this example, you need the underlying to go up - by a considerable amount! And you need this to happen quickly, before the passage of time will remove too much of the extrinsic value of your call (and, obviously, before the call expires). Benefit of the strategy is, in the highly unlikely event of an extreme, unanticipated move of the underlying to the upside, you can make a lot of money. So, it's a low probability, limited risk, unlimited profit, extremely bullish strategy." I don't think you understand options. If it expires, you can't write a new call for the same expiration date as it expired that day. Also what if the stock price decreases further to $40 or even more? If you think the stock will move in either way greatly, and you wish to be profit from it, look into straddles. "Without researching the securities in question I couldn't tell you which cycle each is in, but your answer is that they have different expiration cycles. The following definition is from the CBOE website; ""Expiration cycle An expiration cycle relates to the dates on which options on a particular underlying security expire. A given option, other than LEAPS®, will be assigned to one of three cycles, the January cycle, the February cycle or the March cycle.""" Here is the answer from my brokerage: Regular equity monthly options expire on the 3rd Friday of every month. The last time to trade them is by market close at 4 PM Eastern time. The weekly options will expire on the Friday of that week, also with a last trading time of 4 PM Eastern time. Options that expire in the money by .01 or more are automatically exercised. If you are long an option that is out of the money at expiration, it will expire worthless. If you are short an option, even if it expires out of the money, you are still at risk for possible assignment since the long option holder always has the right to exercise an option prior to expiration.* "This is because volatility is cumulative and with less time there is less cumulative volatility. The time value and option value are tied to the value of the underlying.  The value of the underlying (stock) is quite influenced by volatility, the possible price movement in a given span of time.  Thirty days of volatility has a much broader spread of values than two days, since each day benefits from the possible price change of the prior days.  So if a stock could move up to +/- 1% in a day, then compounded after 5 days it could be +5%, +0%, or -5%.  In other words, this is compounded volatility. Less time means far less volatility, which is geometric and not linear.  Less volatility lowers the value of the underlying.  See Black-Scholes for more technical discussion of this concept. A shorter timeframe until option expiration means there are fewer days of compounded volatility.  So the expected change in the underlying will decrease geometrically.  The odds are good that the price at T-5 days will be close to the price at T-0, much more so than the prices at T-30 or T-90. Additionally, the time value of an American option is the implicit put value (or implicit call).  While an ""American"" option lets you exercise prior to expiry (unlike a ""European"" option, exercised only at expiry), there's an implicit put option in a call (or an implicit call in a put option).  If you have an American call option of 60 days and it goes into the money at 30 days, you could exercise early.  By contract, that stock is yours if you pay for it (or, in a put, you can sell whenever you decide). In some cases, this may make sense (if you want an immediate payoff or you expect this is the best price situation), but you may prefer to watch the price.  If the price moves further, your gain when you use the call may be even better.  If the price goes back out of the money, then you benefited from an implicit put.  It's as though you exercised the option when it went in the money, then sold the stock and got back your cash when the stock went out of the money, even though no actual transaction took place and this is all just implicit. So the time value of an American option includes the implicit option to not use it early.  The value of the implicit option also decreases in a nonlinear fashion, since the value of the implicit option is subject to the same valuation principles. But the larger principle for both is the compounded volatility, which drops geometrically." Think of it this way, if you traveled back through time one month - with perfect knowledge of AAPL's stock price over that period - which happens to peak viciously then return to its old price at the end of the period - wouldn't you pay more for an American option? Another way to think about options is as an insurance policy.  Wouldn't you pay more for a policy that covered fire and earthquake losses as opposed to just losses from earthquakes? Lastly - and perhaps most directly - one of the more common reasons people exercise (as opposed to sell) an American option before expiration is if an unexpected dividend (larger than remaining time value of the option) was just announced that's going to be paid before the option contract expires.  Because only actual stockholders get the dividends, not options holders.  A holder of an American option has the ability to exercise in time to grab that dividend - a European option holder doesn't have that ability. Less flexibility (what you're paying for really) = lower option premium. There are some excellent responses to this question at the time of this post. I have had the greatest success writing 1-month options. The 2 main reasons are as follows: With little time to expiration as stated in the question the implied volatility of the option is dictating the premium. Looking for the highest premiums is a mistake because you are taking a conservative strategy and re-creating it into a high-risk strategy. My sweet spot is a 2-4% monthly return for my initial profit and then mastering management techniques to protect that return and even enhancing it. The ex-dividend date, prevents this, but people are still able to do this and this is an investment strategy. There are some illiquid and immature markets where prices don't adjust.  In the options market people are able to find mispriced deep in the money calls to take advantage of the ex-dividend date. It is called dividend capture using covered calls. I have held an in the money long position on an option into expiration, on etrade, and nothing happened.   (Scalping expiring options - high risk) The option expired a penny or two ITM, and was not worth exercising, nor did I have the purchasing power to exercise it. (AAPL) From etrade's website: Here are a few things to keep in mind about exercises and assignments: Equity options $0.01 or more in the money will be automatically   exercised for you unless you instruct us not to exercise them. For   example, a September $25 call will be automatically exercised if the   underlying security's closing price is $25.01 or higher at expiration.   If the closing price is below $25.01, you would need to call an   E*TRADE Securities broker at 1-800-ETRADE-1 with specific instructions   for exercising the option. You would also need to call an E*TRADE   Securities broker if the closing price is higher than $25.01 at   expiration and you do not wish to exercise the call option. Index   options $0.01 or more in the money will be automatically exercised for   you unless you instruct us not to exercise them. Options that are out   of the money will expire worthless. You may request to exercise   American style options anytime prior to expiration. A request not to   exercise options may be made only on the last trading day prior to   expiration. If you'd like to exercise options or submit   do-not-exercise instructions, call an E*TRADE Securities broker at   1-800-ETRADE-1. You won't be charged our normal fee for   broker-assisted trades, but the regular options commission will apply.   Requests are processed on a best-efforts basis.  When equity options are exercised or assigned, you'll receive a Smart   Alert message letting you know. You can also check View Orders to see   which stock you bought or sold, the number of shares, and the strike   price.  Notes: If you do not have sufficient purchasing power in your account   to accept the assignment or exercise, your expiring options positions   may be closed, without notification, on the last trading day for the   specific options series. Additionally, if your expiring position is   not closed and you do not have sufficient purchasing power, E*TRADE   Securities may submit do-not-exercise instructions without   notification. Find out more about options expiration dates. Think of options as insurance. An insurance company makes money by selling the policies at a rate slightly higher than the average payout.  Most options expire worthless. This is because most options are purchased by hedge funds. To 'hedge' means taking out insurance in case your position goes against you. So the sellers of options obtain a price that covers their (averaged) losses plus provides them with a profit for their trouble.  An option has an amount that it declines in value each day (called theta). At the expiration date the option is worth zero (if it is out-of-the-money). So it is option writers that, typically, make money in the options market (as they are the sellers of insurance). If they didn't make money selling options they would not sell them.  For example, the February call option on SPY strike 200 traded at 8.81 on 12/30. Since then it has crumbled in value to 0.14. The option writer currently stands to make a huge profit.  So, just as with insurance, you (generally) never make money by buying insurance. But the sellers of insurance tend to make money as do the writers of options.  Edit: Theta @ Investopedia Agree with some of the posts above - Barchart is a good source for finding unusual options activity and also open interest -https://www.barchart.com/options/open-interest-change You're assuming options traded on the open market. To close open positions, a seller buys them back on the open market. If there's little on offer, this will drive the price up. An expiration 2 years out will have Sqr(2) (yes the square root of 2!) times the premium of the 1 year expiration. So if the option a year out sell for $1.00, two is only $1.41.  And if the stock trades for $10, but the strike is $12, why aren't you just waiting for expiration to write the next one? "There is a white paper on ""The weekend effect of equity options"" it is a good paper and shows that (for the most part) option values do lose money from Friday to Monday. Which makes sense because it is getting closer to expiration. Of course this not something that can be counted on 100%.  If there is some bad news and the stock opens down on a Monday the puts would have increased and the calls decreased in value. Article Summary (from the authors): ""We find that returns on options on individual equities display markedly lower returns over weekends (Friday close to Monday close) relative to any other day of the week. These patterns are observed both in unhedged and delta-hedged positions, indicating that the effect is not the result of a weekend effect in the underlying securities. We find even stronger weekend effects in implied volatilities, but only after an adjustment to quote implied volatilities in terms of trading days rather than calendar days.""  ""Our results hold for puts and calls over a wide range of maturities and strike prices, for both equally weighted portfolios and for portfolios weighted by the market value of open interest, and also for samples that include only the most liquid options in the market. We find no evidence of a weekly seasonal in bid-ask spreads, trading volume, or open interest that could drive the effect. We also find little evidence that weekend returns are driven by higher levels of risk over the weekend.  ""The effect is particularly strong over expiration weekends, and it is also present to a lesser degree over mid-week holidays. Finally, the effect is stronger when the TED spread and market volatility are high, which we interpret as providing support for a limits to arbitrage explanation for the persistence of the effect."" - Christopher S. Jones & Joshua Shemes You can read more about this at this link for Memphis.edu" For listed options in NYSE,CBOE, is it possible for an option holder to exercise an option even if it is not in the money?  Abandonment of in-the-money options or the exercise of out-of-the-money options are referred as contrarian instructions. They are sometimes forbidden, e.g. see CME - Weekly & End-of-Month (EOM) Options on Standard & E-mini S&P 500 Futures  (mirror): In addition to offering European-style alternatives (which by definition can only be exercised on expiration day), both the weekly and EOM options prohibit contrarian instructions (the abandonment of in-the-money options, or the exercise of out-of-the-money options). Thus, at expiration, all in-the-money options are automatically exercised, whereas all options not in-the-money are automatically abandoned.