A digital option in which the payoff accrues as the reference price or rate lies inside a predefined range (a lower boundary and an upper boundary) at a specific observation time. The option is said to be “delayed” because the payment date differs from the maturity date.

This option is similar to a digital option in all aspects excluding one: the payment depends on the reference rate staying inside the pre-specified range. A standard digital option can be perceived as a special case of a delayed range digital option by setting the payment date equal to the maturity date (T=T1). However, a delayed range digital option provides a terminal payoff equal to one (1 versus 0 as in a standard digital option) paid at date T if and only if the underlying reference rate lies inside a pre-specified range at maturity T1.

This option is known for short as a DRO.