What is ‘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”.
Explaining ‘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.
Further Reading
- Clustering in the futures market: Evidence from S&P 500 futures contracts – onlinelibrary.wiley.com [PDF]
- Evidence on the effect of bond covenants and management compensation contracts on the choice of accounting techniques: The case of the depreciation switch-back – www.sciencedirect.com [PDF]
- Hedging effectiveness and futures contract maturity: the case of NYMEX crude oil futures – www.tandfonline.com [PDF]
- Off the cliff and back? Credit conditions and international trade during the global financial crisis – www.sciencedirect.com [PDF]
- From Kerala to Dubai and back again: construction migrants and the global economic crisis – www.sciencedirect.com [PDF]
- Off the cliff and back? Credit conditions and international trade during the global financial crisis – www.nber.org [PDF]
- The economic role of the audit in free and regulated markets: A look back and a look forward – www.sciencedirect.com [PDF]
- Pricing efficiency of the 3-month KLIBOR futures contracts: an empirical analysis – www.tandfonline.com [PDF]
