Definition
The term option bicycle identifies three routines which dictate whenever a commodity, money, debt, equity or index option will perish. Rules created by the Chicago Board Options Exchange (CBOE) require every one of those underlying assets to possess four expiry months.
Explanation
Commodities, debt, currencies, indicators and common stocks which is traded since options will likely be delegated to an bicycle, and it’s really a predictable pattern of expiry dates to get their own contracts. The CBOE requires every one of those assets to become correlated with a cycle which features four expiry months. The three most Frequent cycles are such that stocks:
- JAJO: which covers January, April, July and October
- FMAN: that covers February, May, August and November
- MJSD: that covers March, June, September and December
Options traded at virtually any bicycle will probably have contracts which expire from the present month and also another month. Additionally they will have contracts which expire in just two of those weeks within their own cycle. Options discontinue trading by the finish of business on the third Friday of this month. Over the next Monday, another option cycle will start to trade.
Example
On January 10than investor might love to buy a telephone option for Company XYZ, that will be traded over the JAJO option cycle (January, April, July, October). Expiration dates for Company XYZ, to the JAJO cycle are: January (current month), February (following month), April and July (from the bicycle program ).
On February 10than investor might love to buy a telephone option for Company XYZ, that will be traded over the JAJO option cycle (January, April, July, October). Expiration dates for Company XYZ, to the JAJO cycle are: February (current month), March (following month), April and July (from the bicycle program ).
On March 10than investor might love to buy a telephone option for Company XYZ, that will be traded over the JAJO option cycle (January, April, July, October). Expiration dates for Company XYZ, to the JAJO cycle are: March (current month), April (following month), July and October (from the bicycle program ).
