conventional option

Conventional option

An option contract arranged on the trading floor and traded regularly. The opposite of exotic option.

Conventional Option

An American option or European option that is not traded on an exchange. That is, a conventional option has no special features that would exclude it from an exchange but, nonetheless, is privately negotiated and agreed between the parties. A conventional option is illiquid because there is little secondary market for it. It has become a rare investment vehicle, as trading options on exchanges have become more common.

conventional option

A put or call option contract negotiated independently of the organized option exchanges. Before 1973 and the opening of the Chicago Board Option Exchange, all options originated through private negotiations. The disadvantage of conventional options is their lack of liquidity due to a limited secondary market. See also FLEX option.