OTC options, also known as exotic options, have become popular among traders due to the flexibility they offer. With an OTC option, buyers and sellers have the ability to structure and customize transactions based on their individual needs. This is one of the benefits that OTC options have over exchange traded options, which are generally standardized.

OTC options are also beneficial to buyers and sellers because there is no centralized exchange on which to trade these contracts. This means that there is no need to go through a clearinghouse and traders can customize the transaction to their specific needs. This can be beneficial for institutional investors who are looking for customized risk and reward profiles.

Another benefit of OTC options is that the strike prices and expiration dates can be adjusted to match the buyer’s needs. This allows buyers and sellers to tailor the contract to their individual goals. For example, a buyer of an OTC option could buy an option contract with an expiration date that is far in the future, allowing them to take advantage of potential price appreciation or depreciation over the long term.

In addition, the lack of a formal exchange for OTC options means that there is no secondary market for these contracts. This allows buyers and sellers to agree to the terms of the contract without worrying about a third-party entering into the transaction. This can be beneficial for buyers and sellers who want a private transaction without much market noise.

Overall, OTC options are a great tool for those who want to take advantage of price appreciation or depreciation over the long term without having to go through the hassle of entering a formal exchange. OTC options offer buyers and sellers the ability to customize the contract to their own needs, allowing for the possibility of achieving customized risk and reward profiles. Additionally, having no need to go through a clearinghouse and no secondary market, buyers and sellers have the assurance of a private transaction.