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Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Date Certain

What it is:

A date certain is a legal term identifying a date on which an action or process must occur or complete.

How it works (Example):

For example, let's say that John Doe rents a house from Jane Smith. The lease is for 12 months and ends on May 31, 2015. This date is written in the contract and is legally binding, making it a date certain.

In the options and derivatives world, expiration dates are dates certain. For example, let's say you purchase a call option on shares of Intel (INTC) with a strike price of $40 and an expiration date of April 16th. This option would give you the right to purchase 100 shares of Intel at a price of $40 on or before April 16th (the right to do this, of course, will only be valuable if Intel is trading above $40 per share). Note that the expiration date always fall on the third Friday of the month in which the option is scheduled to expire.
 

Why it Matters:

Dates certain make deadlines, expiration dates, and other dates crystal clear to all parties involved. Because they are legally binding, a failure to perform by the date certain often entitles one party to some sort of compensation or recourse.

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