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History of Options. Ying Xie BA 543 Spring 2013 May, 21st. Timeline of Options Trading Development. 1872. About 1700 BC. 1634-1637. Options Trading in USA--- Russell Sage Options . Tulip Mania in Holland. Genesis 29 of the Bible . 1700 B.C. 1973-Present. Thales of Miletus

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history of options

History of Options

Ying Xie

BA 543 Spring 2013

May, 21st

slide2

Timeline of Options Trading Development

1872

About 1700 BC

1634-1637

Options Trading in USA--- Russell Sage Options

Tulip Mania

in Holland

Genesis 29 of

the Bible

1700 B.C

1973-Present

Thales of Miletus

----Olive Harvest

Options trading in London

Chicago Board Options Exchange Opens

About 624 BC-547 BC

About 1700-1733

1973

ancient history of options
Ancient History of Options
  • Genesis 29 of the Bible (1700 BC)
ancient history of options1
Ancient History of Options
  • Thales of Miletus (624 BC-547 BC)
    • Greece mathematician and philosopher used options to secure a low price for olive presses in advance of the harvest.
    • This was first recorded

history of speculative

option trading.

    • The frame of current

option trading system.

early history of options
Early History of Options
  • The Tulip-Bulb Mania
    • 1634-1637 Holland
    • Tulips were very popular and expensive with a high demand, as a symbol of wealth, prestige and great status.
    • Tulip dealers used______options to secure a reasonable price to meet the demand
    • Tulip growers used______options to ensure an adequate selling price

call

put

slide6

The Tulip-Bulb Mania----Cont’d

  • Nov.1636—Feb.1637
    • speculative frenzy
    • price of tulip bulbs skyrocketed
  • On Feb.1637
    • The price of tulip bulbs had gotten so high that it can no longer find sensible buyers to sell to.
    • The buying frenzy immediately turned into a selling frenzy.
    • Price of tulip bulbs collapsed
    • The Dutch economy collapsed and people lost their money and homes.
    • Options trading gained a notorious reputation for being a dangerous speculative instrument.
early history of options1
Early History of Options
  • Options Trading in London in 18th and 19th centuries
    • first became well-known trading instruments in the 1690s
    • low trading volume

--“speculative nature”

    • was declared illegal in 1733
    • was illegal until 1860
early history of options2
Early History of Options
  • Options trading in the US - 1872
    • Russell Sage was the first to create call and put options for trading in the US in 1872.
    • First OTC options in the US
    • Making millions within just a few short years
    • Lost a fortune in the market crash of 1884
    • OTC options trading market continued
slide9

Options trading in the US---Cont’d

    • Unstandardized and highly illiquid
    • exercise price was fixed
    • the expiry date was three months after purchase
    • The pricing system was based on what sellers thought was reasonable
    • Options continued to trade in an unregulated manner until 1973.
chicago board option exchange
Chicago Board Option Exchange
  • April 26, 1973 CBOE began trading on standardized, listed options.
  • Under OCC’s performance guarantees
  • Growing Popularity of option trading

---The first day of trading: only call option

---By the end of 1974, average daily volume exceeded 200,000

contracts

  • In 1977, put options introduced
  • Provided a much more liquid and efficient option trading market.
  • Defined how options are traded over a public exchange the way it is traded today.
references
References

History of Options Trading, http://www.optiontradingpedia.com/history_of_options_trading.htm

Genesis 29 Bible Study, http://biblestudyoutlines.org/bible-study-lessons/old-testament-bible-study/genesis-29-bible-study/

The History of Options Trading, http://ezinearticles.com/?The-History-of-Options-Trading&id=6416873

How an Ancient Greek Philosopher Bet on the Future – and Won, http://leightonvw.com/2013/04/01/how-an-ancient-greek-philosopher-bet-on-the-future-and-won/

Chicago Board Option Exchange History, http://www.cboe.com/aboutcboe/History.aspx

A Short History of Options, http://www.tradingmarkets.com/recent/a_short_history_of_options-677437.html

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