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.
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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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How is deferred revenue treated under accrual accounting?
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How does the Fair Accounting Standards Board (FASB) regulate deferred tax liabilities?
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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 >>