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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RELATED FAQS
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How is deferred revenue treated under accrual accounting?
Learn deferred revenue and its treatment under accrual accounting and why various revenue recognition methods result in different ... Read Answer >> -
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 >> -
What are some examples of a deferred tax liability?
Learn why deferred tax liability exists, with specific examples that illustrate how it arises as a result of temporary differences. Read Answer >> -
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 >>