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. Delivery Month

    A key characteristic of a futures contract that designates when ...
  4. FMAN

    One of the three regular option cycles; represents the months ...
  5. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  6. Futures

    A financial contract obligating the buyer to purchase an asset ...
RELATED FAQS
  1. No results found.
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

    Pencil In Profits In Any Market With A Calendar Spread

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

    Stock Option Expiration Cycles

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

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  7. Options & Futures

    How to Use Commodity Futures to Hedge

    Both producers and consumers of commodities can use futures to hedge. We explain, using a few examples, how to achieve commodity hedging with futures.
  8. Options & Futures

    The Fancy Way To Diversify Your Portfolio: Precious Metal Options

    A guide with strategies on how to invest or trade in precious metals by using options.
  9. Options & Futures

    When And How To Take Profits On Options

    Here are the different criteria to ensure maximum profit taking while trading options.
  10. Brokers

    OptionsXpress Vs. OptionsHouse: Which One To Pick?

    OptionsXpress and OptionsBroker -- each offers a price mix and set of services suitable for certain investors based on their trade approach and priorities.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center