A dealer equity option is any equity option

Option (finance)

In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...

 listed on a qualified board of exchange, that is bought or granted by an options dealer (any person registered with an appropriate national securities exchange as a market maker or specialist in listed options). The dealer should be registered with the qualified board of exchange where the option is listed.

Under U.S. tax law, a dealer equity option qualifies as a 1256 Contract

1256 contract

A 1256 Contract is a term used by the Internal Revenue Service to denote any regulated futures contracts, foreign currency contracts, non-equity options , dealer equity options, dealer security futures contracts, and cash settled options A 1256 Contract is a term used by the Internal Revenue...

, and benefits from several tax advantages.