Far Option

DEFINITION of 'Far Option'

The option with the longer time to expiration in a calendar option spread, which involves buying or selling options with different expirations. In such a spread, the shorter-dated option will be the near option. Because far options have more time to attain an in-the-money status, they are associated with larger premiums.

BREAKING DOWN 'Far Option'

For example, a calendar spread strategy may involve selling May calls and buying October calls on the same stock. In this case, assuming it is April, the October calls would be the far options and the May calls would be the near options.

RELATED TERMS
  1. Short Leg

    Any contract in an option spread in which an individual holds ...
  2. Long Leg

    The part of an option spread strategy that involves buying an ...
  3. Call On A Put

    One of the four types of compound options, this is a call option ...
  4. Diagonal Spread

    An options strategy established by simultaneously entering into ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) ...
  6. Step Premium

    A type of option where the cost of purchasing the option is paid ...
Related Articles
  1. Professionals

    Options

    Options
  2. Options & Futures

    Types of Options

    There are many different types of options. In addition to general put options and call option, we will discuss 13 different types of options. Some of these option types are better suited to day ...
  3. Options & Futures

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  4. Options & Futures

    Introduction - Day Trading and Options

    Options have not been a tradition part of day-trading strategy, but this is quickly changing.
  5. Professionals

    Exchange Traded Options

    CFA Level 1 - Exchange Traded Options. Contrasts over the counter options from those traded on the exchange. Discusses the characteristics of many exchange traded options.
  6. Options & Futures

    Options Basics: What Are Options?

    An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. An option, just like a stock ...
  7. Options & Futures

    Near Month In-The-Money Options and The Protective Put

    These two options types are best for day traders who want to gamble on either highly liquid underlying stocks or highly volatile underlying stocks.
  8. Professionals

    European vs. American Options and Moneyness

    CFA Level 1 - European Vs. American Options and Moneyness. Differentiates European and American options and contrasts the concepts of instrinic and time value. Also discusses the moneyness of ...
  9. Options & Futures

    Exploring The World Of Exotic Options

    Exotic options provide investors with new alternatives to manage their portfolio risks and speculate on various market opportunities. The pricing for such instruments is considerably complex, ...
  10. Trading Strategies

    A Guide Of Option Trading Strategies For Beginners

    Options offer alternative strategies for investors to profit from trading underlying securities, provided the beginner understands the pros and cons.
RELATED FAQS
  1. Do options make more sense during bull or bear markets?

    Understand how options may be used in both bullish and bearish markets, and learn the basics of options pricing and certain ... Read Answer >>
  2. How can derivatives be used to earn income?

    Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered ... Read Answer >>
  3. When holding an option through expiration date, are you automatically paid any profits, ...

    Holding an option through the expiration date without selling does not automatically guarantee you profits, but it might ... Read Answer >>
  4. How do I set a strike price in an options spread?

    Find out more about option spread strategies, and how to set the strike prices for bull call spreads and bull put spreads ... Read Answer >>
  5. What is index option trading and how does it work?

    Learn about stock index options, including differences between single stock options and index options, and understand different ... Read Answer >>
  6. Do you have to be an expert investor to trade put options?

    Learn about investing in put options and the associated risks. Explore how options can provide risk, which is precisely defined ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center