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.

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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 >>
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    Yes. Options are available for trading in almost every type of investment that trades in a market. Most investors are familiar ... Read Answer >>
  5. 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 >>
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    Explore put option trading and different put option strategies. Learn the difference between traditional, online and direct ... Read Answer >>
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