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.

  1. Call

    1. The period of time between the opening and closing of some ...
  2. Exchange

    A marketplace in which securities, commodities, derivatives and ...
  3. Option

    A financial derivative that represents a contract sold by one ...
  4. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  5. Clearing House

    An agency or separate corporation of a futures exchange responsible ...
  6. Put

    An option contract giving the owner the right, but not the obligation, ...
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  3. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
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