Contract Week

Contract week refers to the calendar week in which an options contract stops trading and expires. Every listed option has an expiration date, and once that date falls within the current week, traders and brokers say the contract is "in contract week" or "expiration week."

During this week, the option's behaviour changes in ways that catch beginners off guard. Time value, the part of an option's price that reflects the chance it could still move favourably before expiring, decays fastest in the final days before expiration. A trader holding a long option in contract week is watching that time value shrink toward zero, day by day, sometimes hour by hour, even if the underlying stock or index has not moved at all.

The nuance that trips people up is that "expiration" and "contract week" are not the same moment. Contract week is the whole stretch of days leading up to expiration, and price action inside it can get unusually choppy because market makers and large holders are adjusting or closing positions ahead of the deadline. This is sometimes called "pinning" behaviour, where a heavily traded stock's price gets drawn toward a strike price with large open interest (the number of outstanding contracts at that strike) as expiration nears.

Standard monthly equity options typically expire on a Friday, so for those, contract week is simply the week containing that Friday. But weekly options, which exist for many liquid stocks and indexes, have a contract week every single week, since they expire on a rolling basis. Knowing which kind of option you're looking at changes how much this term even applies.