DEFINITION of 'Non-Equity Option'
A term for option contracts whose underlying securities are instruments other than equities. Non-equity options can relate to almost any type of financial underlying, such as fixed income securities, commodities, real estate or currencies. In almost every case, non-equity options would not be exchange traded or done through a clearing house and would be considered over-the-counter (OTC) instruments.
BREAKING DOWN 'Non-Equity Option'
Options, like all derivatives allow individuals to speculate on or hedge against movements of the underlying assets behind the option. Non-equity options allow traders to do so on instruments which are not exchange traded equities. Traders may wish to trade options on the movement of a particular fixed income securities value or yield to maturity, or on the movements of a commodity such as gold.