Dealer Option

DEFINITION of 'Dealer Option'

An option issued on the physical inventory of a commodity. A dealer option is typically issued by companies that buy, sell or otherwise use a commodity in conducting business. This type of option is not traded on an exchange, meaning that it is traded as an over-the-counter security, and thus are less subject to scrutiny and regulation.

BREAKING DOWN 'Dealer Option'

These options are typically written by firms such as clearing houses, which hold the physical commodities and offer them to the public on the over-the-counter market. While dealer options exist outside of traditional trading markets, their sale is still heavily scrutinized because they represent a contract between parties.

RELATED TERMS
  1. Privilege Dealer

    An individual or a securities firm that is registered as a market ...
  2. Exchange-Traded Option

    An option traded on a regulated exchange where the terms of each ...
  3. Physical Option

    An option that is based on a physical asset. Physical options ...
  4. OTC Options

    Exotic options traded on the over-the-counter market, where participants ...
  5. Dealer Incentive

    A corporate sales strategy in which the price a dealer has to ...
  6. Spread Option

    A type of option that derives its value from the difference between ...
Related Articles
  1. Professionals

    Options

    Options
  2. Professionals

    Exchange Traded Options

    CFA Level 1 - Exchange Traded Options. Contrasts over the counter options from those traded on the exchange. Discusses the characteristics of many exchange traded options.
  3. Options & Futures

    Types of Options

    There are many different types of options. In addition to general put options and call option, we will discuss 13 different types of options. Some of these option types are better suited to day ...
  4. Options & Futures

    Introduction - Day Trading and Options

    Options have not been a tradition part of day-trading strategy, but this is quickly changing.
  5. Investing Basics

    What's a Dealer Market?

    In a dealer market, market participants buy and sell through dealers who are designated as market makers.
  6. Investing Basics

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks trade.
  7. Options Traders

    An options trader is anyone who buys and sells options in the capital market. As options trading is most commonly conducted through online option trading brokers, it is also commonly known as ...
  8. Professionals

    General Options Terminology

    General Options Terminology
  9. Professionals

    THE OPTIONS MARKETS

    The Options Markets Standardized options trade on exchanges through a dual auction process similar to that for listed stocks. All standardized options are known as listed options. However, large ...
  10. Forex

    Forex Options

    Stocks are not the only securities underlying options. Learn how to use FOREX options for profit and hedging.
RELATED FAQS
  1. 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 >>
  2. How can I find out which stocks also trade as options?

    The trading of options has become increasingly popular among retail investors as they become aware of the many different ... Read Answer >>
  3. Where can I purchase options?

    In the United States, all options contracts go through one of several options exchanges. An investor must have an account ... Read Answer >>
  4. Is it possible to trade forex options?

    Yes. Options are available for trading in almost every type of investment that trades in a market. Most investors are familiar ... Read Answer >>
  5. Are there any risks involved in trading put options through a traditional broker?

    Explore put option trading and different put option strategies. Learn the difference between traditional, online and direct ... 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 >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center