Front month usually refers to an option contract which expires on the next Expiration date. In time-based option strategies like calendar Spreads it can also mean the contract which is closer to Expiration than the Back Month which is further away.
Front month option contracts tend to be cheaper because they have a shorter period before they expire, although other factors such as Volatility, the price of the Underlying instrument and the Strike Price may also affect the price of the option.
The value of front month Options decays faster due to the effect of Theta on option prices.
Contributed by: Ralph Windsor
Front month option contracts tend to be cheaper because they have a shorter period before they expire, although other factors such as Volatility, the price of the Underlying instrument and the Strike Price may also affect the price of the option.
The value of front month Options decays faster due to the effect of Theta on option prices.
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