OTC Options

The over-the-counter market (or OTC, to its friends) provides a place to buy and sell not-quite-ready-for-prime-time stocks. From large foreign companies that can't quite get listed on the NYSE or NASDAQ, to up-and-coming firms who can't make the listing requirements for the big boys yet, to downright sketchy situations that any honest broker would advise you to stay away from, the OTC exists as a place for, let's say, more offbeat equity selections.

It does the same thing for options. In basic definition, an OTC option is an option contract that trades on the over-the-counter market rather than the more prominent option exchanges. These contracts offer far more...well, options.

OTC options are worked out individually between buyers and sellers. There are no standardized expiration dates or pre-set strike prices. Because these options are so specific, they don't trade on a secondary market. However, the freedom the OTC offers provides more flexibility and a wider range of possibilities for exotic structures.

See: OTCQX.