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.

RELATED TERMS
  1. Deferred Charge

    A prepaid expense that is treated as an asset on a balance sheet ...
  2. Deferred Billing

    The act of charging buyers for their purchases, without interest, ...
  3. Back Months

    The available futures contracts for a particular commodity that ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's ...
  5. Serial Option

    A short-term option on a futures contract in which the underlying ...
  6. Option Cycle

    The expiration dates that apply to the different series of options. ...
Related Articles
  1. Retirement

    Deferred Compensation Plans Vs. 401(k)s

    Discover the major advantages and disadvantages offered by deferred compensation plans for retirement as compared to a 401(k) plan.
  2. Credit & Loans

    Student Loan Deferment: Live to Pay Another Day

    Extending your principal repayment date can increase your chances of fighting off default.
  3. Retirement

    How Non-Qualified Deferred Compensation Plans Work

    These tax-advantaged retirement savings plans have their pros and cons, and employers and employees must follow strict guidelines.
  4. Term

    What Drives An Option's Price?

    The primary drivers of an option’s price are the underlying stock’s current price, the option’s intrinsic value, its time to expiration and volatility.
  5. Options & Futures

    Introduction - Day Trading and Options

    Options have not been a tradition part of day-trading strategy, but this is quickly changing.
  6. Options & Futures

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  7. Options & Futures

    Getting A Handle On The Options Premium

    The price of an option, otherwise known as the premium, has two basic components: the intrinsic value and the time value. Understanding these factors better can help the trader discern which ...
  8. Options & Futures

    Options Basics: How Options Work

    Now that you know the basics of options, here is an example of how they work. We'll use a fictional firm called Cory's Tequila Company.
  9. Options & Futures

    Options Pricing: A Review Of Basic Terms

    The following is intended as a review of basic option terminology, which can be used as a reference as needed: American Options - An option that can be at any point during the life of the contract. ...
  10. Retirement

    How Non-Qualified Deferred Compensation Is Taxed

    The tax savings of non-qualified deferred compensation plans are not the only tax fact you need to know before signing up for one.
RELATED FAQS
  1. What types of companies tend to have the most deferred revenue?

    Learn what types of companies tend to have the highest levels of deferred revenue. Understand when deferred revenue is recognized ... Read Answer >>
  2. How does a company derecognize a deferred tax liability?

    Learn about how deferred tax liabilities arise, when they must be reported in the financial statements, and how a company ... Read Answer >>
  3. Who is eligible to hold a deferred tax asset?

    Find out when U.S. companies are allowed to hold deferred tax assets and report them in the financial statements according ... Read Answer >>
  4. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
  5. How does the Fair Accounting Standards Board (FASB) regulate deferred tax liabilities?

    Learn about the treatment of deferred tax liabilities under the requirements set forth by the Financial Accounting Standards ... Read Answer >>
  6. What are the differences between deferred expenses and prepaid expenses?

    Learn the difference between prepaid expense and deferred expense and how businesses use and record each in standard accounting ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center