In some instruments have back months a lower volatility than front months. Or their volatility depends on seasonality. See for example NG (natural gas). GE (eurodollar) shows the opposite behavior: the front month shows very little volatility, whereas back months show higher volatility.
ZN futures - can I buy contracts that expire in 6 or more months?
- Thread starter blink18
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I could understand if you were a big hedger like oil company, airline, etc. But as a small time speculator, which most of us are, it makes no sense to trade the back month. You'll only end up paying higher premium with less liquidity.You just answered your own question. Because everyone thinks like that..."Why would I want to trade a back month" (and you mean forward month, but we get it.).
So that's why. Everyone thinks it is illiquid, so they don't trade it, so it becomes illiquid. Self-fulfilling.
Don't you dare say that to the energy markets though, like CL.
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Volume pR0n!
CannonTrading_Ilan
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you could...but no liquidity will put you at additional risks other than price risk.