DEFINITION of 'Back Month Contract'

A type of futures contract that expires in any month past the front month futures contract. The price of the first back month futures contract is often used along with the front month futures price to calculate the calender spread.

Also referred to as a "far month contract".

BREAKING DOWN 'Back Month Contract'

The liquidity of a back month futures contract will constantly increase as it approaches expiration. Investors that employ an auto-roll strategy will roll over their futures positions once the daily volume of the first back month futures contract exceeds the daily volume of the front month futures contract.

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