What are monthly options?
In one line: Monthly options are the standard option contracts that expire on the third Friday of each month, usually with the deepest liquidity and the most strikes, which makes them the default expiry for many option sellers.
How it works
Every optionable stock has a monthly expiry: the third Friday of the month. These were the original contracts, and on most stocks they're still the busiest. They tend to have the most strikes, the most Open interest and the tightest bid-ask spreads.
On the Options chain, monthlies are the expiries with the big volume. Weeklies sit between them on popular names. Smaller stocks often have only monthlies.
Sellers in the wheel strategy usually sell the monthly that's 30 to 45 days out. Three reasons:
- Enough premium to be worth the risk, and enough time to manage the trade if the stock moves.
- Decay is already meaningful at 45 days and speeds up through the month.
- Liquidity. Rolling or closing is cheaper when the spread is tight.
The third Friday is also OpEx, the day the whole month's contracts settle. Volume is heavy, and stocks sometimes hover near big strikes.
An example (hypothetical)
An illustration, not a trade idea. Made-up stock XYZ trades at $50. You sell the monthly Put option at the $45 strike, 32 days out, for $1.00. You set aside $4,500.
| XYZ on the third Friday | What happens | Result |
|---|---|---|
| $55 | Put expires worthless | +$100 |
| $50 | Put expires worthless | +$100 |
| $45 | Put expires, or is assigned at the money | +$100 or shares at a $44 net cost |
| $41 | Assigned: 100 shares at $45, worth $4,100 | +$100 − $400 = −$300 |
Compare the losing row with a weekly. With a monthly, the drop to $41 might have happened in week one, leaving three weeks for a recovery or a roll. With a weekly, it's Friday and the shares are yours. The month didn't prevent the loss. It gave you time to decide about it.
Why it matters for sellers
Monthlies are the default because they balance the two forces sellers care about: decay and room. Shorter expiries decay faster but leave no room. Longer ones give room but decay slowly and carry more Vega risk.
A few practical notes:
- Check the earnings date. A monthly 45 days out often spans the report. Many sellers skip that month or choose the expiry before it.
- Watch the calendar. Monthly expiry is the third Friday, not the last. Some platforms label it in the chain.
- Thin stocks only have monthlies. If the chain shows one expiry a month and wide spreads, size down.
A simple habit: open the chain, find the monthly between 30 and 45 days out, and start there. Move only if you have a reason.
Questions
When do monthly options expire?
On the third Friday of the month, at the close. If that Friday is a holiday, they expire on the Thursday before.
Why do wheel sellers prefer monthly options?
Monthlies 30 to 45 days out give useful premium, meaningful decay and time to roll or wait if the stock moves. They're also the most liquid expiry on most stocks, so closing costs less.
Are monthly options better than weekly ones?
Neither is better. Monthlies trade some decay speed for time and liquidity. Weeklies decay faster but leave no room when the stock gaps through the strike.
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