Why Is the Volume of Trading in Options Often Highest for Contracts Expiring in the near Term?

Trading volume is often highest for near-term expirations due to several factors. These options have the most sensitive prices (high gamma) and the fastest time decay (high theta), making them attractive for short-term speculators and income-generating strategies like selling covered calls.

The lower premiums also make them more accessible to retail traders. Furthermore, professional market makers are very active in these contracts, providing liquidity and hedging their positions, which further boosts trading volume as expiration approaches.