Deferred Option Month

DEFINITION of 'Deferred Option Month'

The latter month or months of an option or futures contract. For example, when considering a three-month option at the time of purchase months two and three could be thought of as deferred. In the second month of ownership, the third month could be considered deferred.

BREAKING DOWN 'Deferred Option Month'

The number of deferred months is part of what gives an option its time value, which is the difference between an option's trading value and its intrinsic value. As the expiration date of an option nears, its time value diminishes.


In terms of future contracts, if today is January 1 and the contract will be settled on September 1, September is considered the deferred month.

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RELATED FAQS
  1. What are some examples of deferred revenue becoming earned revenue?

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