A vanilla European option's payoff depends on a single number: the underlying's price at the moment of expiration. Whatever the stock did between contract initiation and expiration is irrelevant to the payoff function. The contract is, in formal terms, path-independent — only the endpoint matters.

A large class of contracts in commodity, foreign-exchange, and structured-product markets has the opposite feature: the payoff function references information about the underlying's full path, not just its terminal value. Path-dependent options are the technical name for this family. The three canonical structures are Asian options (payoff based on average price), barrier options (payoff conditional on hitting or not hitting a level), and lookback options (payoff based on the max or min reached during the contract period).

All three are widely used by sophisticated end-users — energy companies hedging average-realized prices, treasuries hedging multi-month FX exposures, and structured-product issuers building yield-enhanced retail products — but rarely traded in vanilla retail option chains.