Deferred Payment Option

DEFINITION of 'Deferred Payment Option'

An option with all the characteristics of an American vanilla option, with one exception: payment is deferred until the original expiration date.

BREAKING DOWN 'Deferred Payment Option'

The option can be exercised at any time; however, payment is deferred until the original expiration date of the option. These options are considered long term options, with expiration dates at least one year away.

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RELATED FAQS
  1. What happens when an option expires in money? Do I have to sell the option to make ...

  2. When holding an option through expiration date, are you automatically paid any profits, ...

    Holding an option through the expiration date without selling does not automatically guarantee you profits, but it might ... Read Answer >>
  3. Can an option be exercised on the expiration date?

    The use of options has increased dramatically over the years as a way to profit from or hedge against the volatile movements ... Read Answer >>
  4. How can derivatives be used to earn income?

    Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered ... Read Answer >>
  5. How do I change my strike price once the trade has been placed already?

    Learn how the strike prices for call and put options work, and understand how different types of options can be exercised ... Read Answer >>
  6. Does the seller (the writer) of an option determine the details of the option contract?

    The quick answer is yes and no. It all depends on where the option is traded. An option contract is an agreement between ... Read Answer >>
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