What does Back Months mean?
In futures markets, different types of contracts are available that would expire in different months. The month which has the earliest expiry date of the contract is known as the ‘Front Month’ and the month containing the contract to expire last is known as ‘Back Months’.
Futures Knowledge Explains Back Months
In futures markets, back months is the month with expiration date that are farthest away from the nearest expiration date. Suppose in June, futures for a commodity are available with expiry in June, July, August and September. The September contract is the back months contract, because out of all the available contracts, it expires last. The difference in price between the front month futures contract and the back month futures contract is used to calculate the calendar spread.