Back month refers to Options contracts with more than one month until Expiration. In Options strategies such as the Calendar Spread where Options are traded with different expirations, the back month is the one which is further away in time. Contrast with Front Month which is closer to Expiration.
The back month option is generally more expensive because it has a higher Time Value, however, other factors such as the Strike Price, Underlying asset or commodity price and Volatility may also have an effect on the price.
Contributed by: Ralph Windsor
The back month option is generally more expensive because it has a higher Time Value, however, other factors such as the Strike Price, Underlying asset or commodity price and Volatility may also have an effect on the price.
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