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Far Option

What is 'Far Option'

The option with the longer time to expiration in a calendar option spread, which involves buying or selling options with different expirations. In such a spread, the shorter-dated option will be the near option. Because far options have more time to attain an in-the-money status, they are associated with larger premiums.

Explaining 'Far Option'

For example, a calendar spread strategy may involve selling May calls and buying October calls on the same stock. In this case, assuming it is April, the October calls would be the far options and the May calls would be the near options.


Further Reading


Is economics performative? Option theory and the construction of derivatives markets
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www.aeaweb.org [PDF]
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Real options and interactions with financial flexibilityReal options and interactions with financial flexibility
www.jstor.org [PDF]
… trial for worsening RR MS and SP MS [4] offered a therapeutic option for transitional … treatment for progressive MS seems more realistic than ever, but it is still far from a … In conclusion, repair strategies are unquestionably the most exciting and promising options, but they require a …

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www.jstor.org [PDF]
… trial for worsening RR MS and SP MS [4] offered a therapeutic option for transitional … treatment for progressive MS seems more realistic than ever, but it is still far from a … In conclusion, repair strategies are unquestionably the most exciting and promising options, but they require a …

A closed-form solution for options with stochastic volatility with applications to bond and currency optionsA closed-form solution for options with stochastic volatility with applications to bond and currency options
academic.oup.com [PDF]
… trial for worsening RR MS and SP MS [4] offered a therapeutic option for transitional … treatment for progressive MS seems more realistic than ever, but it is still far from a … In conclusion, repair strategies are unquestionably the most exciting and promising options, but they require a …

An option pricing approach to evaluating petroleum projectsAn option pricing approach to evaluating petroleum projects
www.sciencedirect.com [PDF]
… trial for worsening RR MS and SP MS [4] offered a therapeutic option for transitional … treatment for progressive MS seems more realistic than ever, but it is still far from a … In conclusion, repair strategies are unquestionably the most exciting and promising options, but they require a …

A critical financial analysis of the Private Finance Initiative: selecting a financing method or allocating economic wealth?A critical financial analysis of the Private Finance Initiative: selecting a financing method or allocating economic wealth?
www.sciencedirect.com [PDF]
… trial for worsening RR MS and SP MS [4] offered a therapeutic option for transitional … treatment for progressive MS seems more realistic than ever, but it is still far from a … In conclusion, repair strategies are unquestionably the most exciting and promising options, but they require a …

Trends in park tourism: Economics, finance and managementTrends in park tourism: Economics, finance and management
www.tandfonline.com [PDF]
… trial for worsening RR MS and SP MS [4] offered a therapeutic option for transitional … treatment for progressive MS seems more realistic than ever, but it is still far from a … In conclusion, repair strategies are unquestionably the most exciting and promising options, but they require a …

Real options in practice: an exploratory survey of how finance officers deal with flexibility in capital appraisalReal options in practice: an exploratory survey of how finance officers deal with flexibility in capital appraisal
www.sciencedirect.com [PDF]
… trial for worsening RR MS and SP MS [4] offered a therapeutic option for transitional … treatment for progressive MS seems more realistic than ever, but it is still far from a … In conclusion, repair strategies are unquestionably the most exciting and promising options, but they require a …



Q&A About Far Option


What is Far Option?

Far option is the option with the longer time to expiration in a calendar option spread.

When would you use a calendar spread strategy?

You can use this strategy when you believe that there will be a large price movement within a specific period of time but not over a long period of time.

What type of strategy may involve selling May calls and buying October calls on the same stock?

A calendar spread strategy may involve selling May calls and buying October calls on the same stock.

What does "in this case" mean in the sentence "assuming it is April"?

In this case means that we assume it is April, so we know what month each call expires.

Why would you want to sell May calls and buy October calls on the same stock if you expect only small price movements during those months?

If you expect only small price movements during those months, then your goal might be to collect premium for as long as possible without having to pay out any money until expiration occurs. The farther out your short call goes, then the longer amount of time your trade will last before expiring worthless or being profitable .

Which types of stocks would benefit most from such strategies ?

Stocks that tend to move slowly or not at all over short periods of times (less than one year) could benefit from these strategies because they give traders more opportunity for their trades to become profitable .

How do far options differ from near options?

Near options have less time than far options to attain an in-the-money status.

Why are far options associated with larger premiums?

Because they have more time to attain an in-the-money status, they are associated with larger premiums.

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