What is front month and back month futures? (2024)

What is front month and back month futures?

In the commodity futures markets, the term “back months” refers to the futures contracts whose delivery dates are relatively far in the future. By contrast, so-called front months are those closest to the present date.

(Video) Front Month vs Back Months on VIX
(Andrew Coffey)
What is the front month and prompt month?

It is the contract that will expire first (often, but not always, within the next month). The near month is also called the prompt month, the front month, the lead month, and the first nearby.

(Video) Lesson 9: Futures Contract Expiration & Rollover
What is a back month contract?

Definition of Back Months

“Back months” is used to refer to futures contracts that have a delivery date that's due far into the future. Back months is generally known to be a popular term in commodity trading.

(Video) Understanding rollover in futures and options (F&O)
(Zerodha Varsity)
What is current month next month and the far month futures contract?

Futures contract have a maximum of 3-month trading cycle – the near month contract(which is the 1st month ) the next month contract (which is the 2nd month ) and the far month contract (which is the 3rd month ). A new contract is introduced on the trading day following the expiry of the near month contract.

(Video) Futures Spread Trading 101 – Everything You Need to Know
What is the front month in Topstep?

At Topstep®, we define the front-month as the contract that currently has the most volume, and we require traders to be in the front month. Markets that have more participation and volume have more liquidity. With more participation, traders can get in and out of positions with greater ease, reducing your overall risk.

(Video) Front Month Futures
(Cboe Global Markets)
What is a front month future?

A front month is the nearest expiration date for a futures or options contract. The front month represents the shortest length of time for which the contract can be purchased. Front months are typically the most heavily traded and most liquid options and futures contracts.

(Video) Front Month Futures
(Cboe Global Markets)
What is an example of a front month?

Example of a Front-Month Contract

The current month is March, and the front-month contract for gold is April. The trader buys the April contract for $1,800 per ounce, expecting the price of gold to increase by the expiration date in April, also known as the delivery date.

(Video) How to know which futures contract to trade and when they expire or Rollover
(NetPicks Smart Trading Made Simple)
When should I switch to a new futures contract?

Traders will determine when they need to move to the new contract by watching volume of both the expiring contract and next month contract. A trader who is going to roll their positions may choose to switch to the next month contract when volume has reached a certain level in that contract.

(Video) Pro Tip to Rolling Contracts for Futures Trading! Example E-mini S&P 500 June 2023 New Front Month
(Hima Reddy)
What happens if I don't square off futures on expiry?

If an options contract position is not squared off before the expiration date, the trader can lose the total premium and any taxes and brokerage charges paid. You can utilize leverage to make purchases or sales during the trading day with an intraday (MIS/CO) order (up to 5 times the money in your account).

(Video) Charting the markets - February 12, 2024
How long can you hold a futures contract?

And unlike stocks, futures contracts do expire. The expiration date is the last day a contract can be traded, and expiration cycles can be monthly or quarterly. Keep in mind that different products follow different expiration cycles. To view all expiration cycles in thinkorswim, go to the Trade tab> All Products.

(Video) How to Rollover Futures Contracts with NinjaTrader 8

What is the 2 rule on Topstep?

In an effort to protect our firm and our traders, we will not allow market participation when a product is trading within 2% of a Price Limit. This Prohibited Conduct is enforced in the following accounts: Express Funded Account™, Legacy Funded Account, Pro Account®, & Premium Funded Account®.

(Video) Front Month Future Premium
(Cboe Global Markets)
What happens if you lose money on Topstep?

If, while trading, the account balance falls below the minimum account balance displayed on your Trader Dashboard, you will be pulled from your trades right away, your account will be liquidated, and the rule will be broken. The Maximum Loss Limit value is calculated and set at the end of the trading day.

What is front month and back month futures? (2024)
Can you make money with Topstep?

Traders will receive 100% of the profits from payouts, up to $10,000. After the first $10,000 of funds have been received by the trader, the profit split will become 90/10, with the trader receiving 90% of payouts and Topstep® retaining 10% of the requested payout.

How do I remember my futures month code?

Each calendar month expiration is identified by a single letter as follows:
  1. January – F.
  2. February - G.
  3. March -H.
  4. April -J.
  5. May - K.
  6. June - M.
  7. July - N.
  8. August - Q.

Can you back out of a futures contract?

There are two ways to end your position in a futures contract before its expiration date. The first is to sell the contract to someone else. This will end your position, although it doesn't end the contract. The second, and more common method, is called "closing out."

What is backwardation in futures?

Key Takeaways. Backwardation is when the current price of an underlying asset is higher than prices trading in the futures market. Backwardation can occur as a result of a higher demand for an asset currently than the contracts maturing in the coming months through the futures market.

What happens if you hold a futures contract until expiration?


Settling a futures contract involves terminating the contract by clearing the payments arising out of the position held. Unlike offsetting or rolling over, the settlement is done on the expiry date. The settlement of futures contracts can be done through physical settlement or cash settlement.

Can I sell futures before expiry?

You can choose to exit your index futures contract before the date of expiry if you believe that the market will rise before the expiry of your contract period and that you'll get a better price for it on an earlier date.

What are the futures month symbols?

Futures Months
  • January – F.
  • February -G.
  • March – H.
  • April – J.
  • May – K.
  • June – M.
  • July – N.
  • August Q-

What does front month mean?

Summary. The front month in the futures market is the contract with the shortest time to expiration. It is the most liquid month, meaning it is the easiest to trade and has the lowest trading costs. In this blog, we will discuss what a front month is, how it works, and provide some examples for better understanding.

What is single month?

Single Month is defined as the position held in any given contract month outside of the spot period effective date. For example, a CBOT December 2023 Corn futures contract has a single month limit of 57,800 net futures-equivalent contracts prior to the spot month effective date.

What happens if you don't sell futures contract?

You can simply choose to ignore the contract and the contract expires on the expiry date. However, under a Futures contract, you are required to fulfil the contract on the expiry date. You cannot let the contract expire.

Why do futures contracts fail?

Failure: An Insufficient Commercial Need

Some new contracts historically have failed because there was an insufficient need for commercial hedging. This occurred when economic risks were not sufficiently material or contracts already provided sufficient risk reduction.

How many days a week can you trade futures?

What are the trading hours for futures? Futures markets are open virtually 24 hours a day, 6 days a week. But keep in mind that each product has its own unique trading hours.

How not to lose money on futures trading?

7 Tips Every Futures Trader Should Know
  1. Establish a trade plan. The first tip simply can't be emphasized enough: Plan your trades carefully before you establish a position. ...
  2. Protect your positions. ...
  3. Narrow your focus, but not too much. ...
  4. Pace your trading. ...
  5. Think long—and short. ...
  6. Learn from margin calls. ...
  7. Be patient.

You might also like
Popular posts
Latest Posts
Article information

Author: Madonna Wisozk

Last Updated: 20/11/2023

Views: 6171

Rating: 4.8 / 5 (48 voted)

Reviews: 87% of readers found this page helpful

Author information

Name: Madonna Wisozk

Birthday: 2001-02-23

Address: 656 Gerhold Summit, Sidneyberg, FL 78179-2512

Phone: +6742282696652

Job: Customer Banking Liaison

Hobby: Flower arranging, Yo-yoing, Tai chi, Rowing, Macrame, Urban exploration, Knife making

Introduction: My name is Madonna Wisozk, I am a attractive, healthy, thoughtful, faithful, open, vivacious, zany person who loves writing and wants to share my knowledge and understanding with you.