Nearby Month

AAA

DEFINITION of 'Nearby Month'

In the context of options and futures, the month closest to delivery (futures) or expiration (options). "Nearby month" is sometimes referred to as "nearest month," "front month" or "spot month." A contract for the nearby month is the shortest contract that an investor can purchase. Trading is usually most active for the nearby month as compared to deferred months.



INVESTOPEDIA EXPLAINS 'Nearby Month'

In a normal futures market that is in contango, nearby months are less expensive than deferred months. In backwardation, futures market conditions are such that the nearby month is more expensive than deferred months. The nearby month is a key component of many options and futures trading strategies, including the calendar spread and reverse calendar spread. These strategies seek to profit from differences in pricing between the nearby month and a more distant month for the same underlying market.



RELATED TERMS
  1. Backwardation

    A theory developed in respect to the price of a futures contract ...
  2. Contango

    A situation where the futures price of a commodity is above the ...
  3. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  4. FMAN

    One of the three regular option cycles; represents the months ...
  5. Futures

    A financial contract obligating the buyer to purchase an asset ...
  6. Delivery Month

    A key characteristic of a futures contract that designates when ...
Related Articles
  1. Options & Futures

    Options Trading: How Implied Volatility Affects Calendar Spread

    Even if the risk curves for a calendar spread look enticing, a trader needs to assess implied volatility for the options on the underlying security.
  2. Options & Futures

    Stock Option Expiration Cycles

    Understanding expiration cycles is just one more way to help you increase your success rate when trading options.
  3. Options & Futures

    Pencil In Profits In Any Market With A Calendar Spread

    This options spread strategy provides many advantages over plain old puts and calls.
  4. Options & Futures

    Trading Calendar Spreads In Grain Markets

    Futures investors flock to spreads because they hold true to fundamental market factors.
  5. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  6. Options & Futures

    What are the differences between divergence and convergence?

    Find out what technical analysts mean when they talk about a market experiencing divergence or convergence and how they affect trading strategies.
  7. Options & Futures

    What are the most common momentum oscillators used in options trading?

    Read about some of the most common technical momentum oscillators that options traders use, and learn why momentum is a critical concept for options trading.
  8. Options & Futures

    Futures Quotes Explained The "Easy" Way

    If there’s a security whose price fluctuates, there can theoretically be a futures marketplace for it.
  9. Options & Futures

    How are Bollinger Bands® used in options trading?

    Use Bollinger Bands to identify volatility changes and place options trades at the right time; profit in bull or bear markets using these strategies.
  10. Options & Futures

    Why is the Accumulative Swing Index helpful for traders and/or investors?

    Find out why J. Welles Wilder believed that the accumulative swing index could be used in the futures markets to indicate long-term trends.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center