Back Month Contract

A back month contract is a futures or options contract whose expiration date lies further in the future than the nearest available expiration. When a market lists several expiration dates for the same underlying asset, traders sort them by how soon they expire. The one expiring soonest is called the front month (or near month); every expiration after that is a back month, sometimes also called a far month or deferred month.

Exchanges typically list a chain of expirations for a given product, say monthly or quarterly contracts stretching out a year or more. As the front month approaches its expiration and eventually stops trading or settles, the next contract in line becomes the new front month, and what used to be the second-nearest expiration is now the front month too — the whole chain shifts forward. So "back month" is not a fixed contract, it is a relative position in the expiration lineup that changes over time.

The nuance beginners trip over is that back month contracts usually trade with less volume and wider bid-ask spreads than the front month, because most short-term speculative activity concentrates in the nearest expiration. Prices for back months can also differ meaningfully from the front month due to the cost of carrying the position longer (storage, interest rates, dividends, or market expectations about the future), a relationship often visualized as the futures curve or the term structure of options implied volatility. A back month price moving differently from the front month does not necessarily signal something is wrong; it can simply reflect time and carrying costs.

It's also worth noting that "back month" is a relative label used across both futures and options markets, and a contract that is a back month today will become the front month eventually, simply by the calendar advancing and nearer contracts expiring off the board.