An option that trades over the counter rather than on a formal exchange. As such, the trading parties involves directly, without the help and support of an intermediary, in writing and buying options. However, the brokers and dealers operating in the over the counter markets are usually regulated by some government-linked authority such The Financial Industry Regulatory Authority (FINRA) in the United States. Participants in over-the-counter markets can define the features of the options they trade.
OTC options are necessarily exotic options.
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