what is a front fee 
a front fee is the initial payment made by an investor when he purchases a compound option compound option is the term given to what is essentially an option on an option that is to say the trader may wish to buy or sell an option at a future date and the front fee is what he must pay in order to have that opportunity the four types of compound options are call on a call option put on a put option call on a put option and put on a call option for example an investor sees a company stock valued at 24 per share and he believes the price will rise dramatically but is not certain he decides that if the price reaches 30 per share then his prediction is probably correct and the price is likely to continue rising well beyond 30 in this case he can decide to purchase a compound option a call on a call which will give him the right to purchase say 100 shares if the stock reaches 30 by a particular date december 31 he would then pay a front fee for example 500 thus giving him the right to make that purchase if the stocks hit 30 if he chooses to exercise his option and buy 100 shares when the price reaches 30 he would pay the full 3 000 100 shares x 30 share the 3 000 is called the back fee the front fee does not obligate the trader to exercise the compound option but it does allow him to do so 