Back Months

Understanding Back Months

When discussing option trading with cryptocurrencies, you'll often come across the term 'Back Months'. To clarify any confusion, let's take a more detailed look at what this term represents.

Explanation of Back Months

In the world of option trading, contracts are often categorized by their expiry date. Back Months refer to those option contracts that are further from expiration compared to the near month options (those expiring soonest).

Importance of Back Months

Understanding the concept of Back Months plays a major role in the trading strategy. Investors often opt for these contracts when they believe the trend of a particular cryptocurrency will continue for a longer duration. They provide a bigger window for the price movement, enhancing the scope for potential profits.

Back Months in Options Trading with Cryptocurrencies

In the volatile world of cryptocurrency trading, investing in Back Month contracts can act as a buffer. As the value of cryptocurrencies can drastically fluctuate, these contracts can provide a degree of protection against short-term market uncertainties.

Things to Consider

Though Back Months contracts may seem attractive, one must be prepared for higher premiums. These are due to their longer duration and the increased volatility generally associated with cryptocurrencies. However, if the investor's anticipation of market trend proves correct, these premiums are often justified by the potential profits.