What is Date Certain?
A date certain is a legalidentifying a date on which an action or process must occur or complete.
How Does Date Certain Work?
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 of Intel (INTC) with a strike price of $40 and an expiration date of April 16th. This 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, only be valuable if Intel is trading above $40 per share). that the expiration date always fall on the third Friday of the month in which the option is scheduled to expire.
Why Does Date Certain Matter?
Dates certain make deadlines,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.