An exotic option whose underlying is a foreign asset (like a foreign equity) denominated in either domestic or foreign currencies and struck in either the domestic or foreign currency. This type of option also constitutes options which allow holders to exercise on the foreign exchange component, with the foreign equity being delivered in the final payoff upon exercise.

Compo options are generally classified as options on foreign equity struck in domestic currency and equity-linked foreign exchange options. In the first type, the strike price is denominated in domestic currency, and so is the payoff since the price of the foreign equity is converted to the domestic currency at the prevailing exchange rate at expiration. The value of this option depends on the correlation between the exchange rate and the foreign equity. Therefore, this option provides some protection against currency risk, since this correlation is a factor in the valuation.

The compo option generally belongs to the class of currency-protected options.

It is also known as a composite option.