Vanilla and Exotic Options
Vanilla and exotic options are the two major classes of options. They are available for all types of options products such as stock options, futures options and forex options. Plain vanilla and exotic options differs greatly from one another very widely.
Vanilla options are the regular options with traditional/standard features like expiratory rate, strike price etc. They include both Buy and Sell options of American and European styles. Vanilla options are traded through centralized markets. Exotic options are options which differ from this standard make up. These are complex options which contain some trading specifications. Exotic options are traded over the counter. There are many types of exotic options as
Vanilla options are the regular options with traditional/standard features like expiratory rate, strike price etc. They include both Buy and Sell options of American and European styles. Vanilla options are traded through centralized markets. Exotic options are options which differ from this standard make up. These are complex options which contain some trading specifications. Exotic options are traded over the counter. There are many types of exotic options as
- Choose Options – options that can be exercised both as put and call options at specific points.
- Barrier Options - payoff depends on the crossing or predetermined barriers.
- Asian or Average Options – payoff depends on the average price of underlying product.
- Compound Options – Options having options as underlying property.
- Digital Options – Determination of payoff is done after the underlying product crosses a pre-determined limit.
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