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.

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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. 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 >>
  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. How do I measure option liquidity?

    An option is a financial instrument that gives the holder the right to purchase shares in a company at a certain set price ... Read Answer >>
  5. How can derivatives be used to earn income?

    Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered ... Read Answer >>
  6. 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 >>
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