Over the Counter Option Definition


Option contracts that are not traded on an exchange. Because they are over-the-counter, OTC options are not standardized contracts and, as a result, can have any number of unusual features. This allows investors more flexibility, but creates additional risk. See also: Exotic option.Want to thank TFD for its existence. The OTC option has a direct link between buyer and seller, has no secondary market, and has no standardization of striking prices and expiration dates.

See also Secondary Market. OTC Options. With OTC options, both hedgers and speculators can benefit from avoiding the restrictions that normal standardized exchanges place on options. The flexibility allows participants to achieve their desired position more precisely and cost effectively.




Over the Counter Option Definition

Over the Counter Option Definition