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. 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 >>
  2. 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 >>
  3. What happens when an option expires in money? Do I have to sell the option to make ...

  4. How are call options priced?

    Learn how aspects of an underlying security such as stock price and potential for fluctuations in that price, affect the ... Read Answer >>
  5. 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 >>
  6. What's the difference between a regular option and an exotic option?

    Before learning about exotic options, you should have a fairly good understanding of regular options. Both types of options ... Read Answer >>
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