Vanilla option

A vanilla option is a type of derivative security. A particular type of option is typically described as vanilla if it is well-established in the financial markets and is easy to trade - vanilla options typically have good liquidity at a wide range of strike prices and maturities. Pricing models usually deliver closed-form solutions for the present value of vanilla options. Less common options are called exotic options.

Sort of but really "vanilla" means simple, exotic means "difficult". Need to mention fact that this is term with no generally accepted meaning. DBU

In the foreign exchange and stock markets the most vanilla options are european call and put options. In the interest rate market swaps and caps are the vanilla instruments, although the former does not actually involve any optionality. Options on swaps, known as swaptions are sufficiently liquid to be called vanilla. The credit derivatives market is less mature. Here the three most traded instruments are total return swaps, credit default swaps and credit spread options. These are widely expected to become the mainstream vanilla products of the market in the coming years.