In futures trading, the terms spot month, nearby month, front month and near month are all used to refer to the earliest month in which a futures contract can expire. When futures contracts expire, the transaction goes through, meaning the seller must deliver the contract’s underlying assets and the futures contract holder at the time of its expiry must accept the underlying assets.
Futures contracts are typically offered in several issues, with each issue expiring in a different month. These are known as futures contract months. The number and calendar months of futures contract months differ depending on the underlying asset used for the futures contract. The first possible expiry month is the spot month. The last possible expiry month is the far month.
Some futures contracts include clauses which allow contracts which are not exercised in the spot month to be rolled over to the next month, up to the far month at the latest.
Example: The futures contract months for wheat futures contracts traded on the Chicago Board of Trade (CBOT) are March, May, July, September and December. In this case, March is the spot month and December is the far month. Investors can obtain March contracts, May contracts, July contracts or December contracts.
Many investors use futures contracts as an investment vehicle rather than as a means of securing delivery of produce. These investors aim to sell futures contracts at a profit before they expire. Only manufacturers and retailers will normally want to actually exercise futures contracts and have the underlying assets delivered. Because of this, a great deal of trading of futures contracts typically occurs during the near month. Trading typically becomes less liquid over each futures contract month.
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