The nearest expiration date for a futures or options contract is referred to as the front month, also known as “near” or “spot” month. Back month, or “far month,” contracts have expiration dates that are later than front month contracts.
What is the current front-month futures contract?
The month indicated in a futures contract that is nearest to the present date is referred to as the front month in futures trading. This means that the front month is the shortest period during which the contract can be bought. The contract is called a back month contract rather than a front month contract when the current date and the expiration date are not in the same calendar month.
What is the difference between the current month, next month, and far month futures contracts?
The near month contract (which is the first month), the next month contract (which is the second month), and the far month contract (which is the third month) have a maximum trading cycle of three months (which is the 3rd month ). The trading day after the near month contract expires, a new contract is introduced. There will always be three legitimate contracts available for trade at any given time. AxisDirect, on the other hand, would allow trading in near-month, next-month, and select far-month contracts. Through the AxisDirect interface, you can trade Nifty and Mini Nifty for the next month.
What is the current contract for futures?
Futures are financial derivatives that bind the parties to trade an item at a fixed price and date in the future. Regardless of the prevailing market price at the expiration date, the buyer or seller must purchase or sell the underlying asset at the predetermined price.
Are futures a high-risk investment?
Futures are no riskier than other types of assets such as stocks, bonds, or currencies in and of themselves. This is because the values of futures, whether they are futures on stocks, bonds, or currencies, are determined by the prices of the underlying assets.
What if you keep a futures contract until it expires?
A futures contract’s expiration day is the date on which it will cease to exist. If you keep a contract past its expiration date, you will be obligated to buy the underlying asset. Options allow you to exercise your rights in a variety of ways. Futures do not work in this way.
How are contracts for futures settled?
Traders roll over futures contracts to move from a near-expiring front month contract to a futures contract in a later month. Futures contracts have expiration dates, whereas equities trade indefinitely. To avoid the fees and obligations involved with contract settlement, they are rolled over to a different month. Physical settlement or cash settlement are the most common methods of settling futures contracts.
What if you don’t sell your futures contract?
It will not be rolled-over if you do not square-off futures. The payment will be made in cash. If you want to roll over, you must square-off manually and then buy stock futures for the next month.
How are the majority of futures contracts settled?
There are two ways to close a futures contract position before the expiration date.
The first option is to sell the contract to another party. This will terminate your employment, but it will not terminate your contract.
In the futures market, closing out a position entails taking out a contract that is equivalent to but opposite to the one you are currently holding. You would take a short position with the identical strike price, expiration date, and assets to close out a long position. With a long contract, you would do the same thing to close out a short position.
What is a small S&P 500 continuous future contract?
The S&P 500 E-mini is a futures product with a value of 1/5 that of a conventional S&P 500 futures contract. 1. S&P 500 E-minis have surpassed the volume of traditional S&P 500 futures contracts as the major futures trading instrument for the S&P 500.
