History of options
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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

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History of options

History of Options

Ying Xie

BA 543 Spring 2013

May, 21st


History of options

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


History of options

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


History of options

  • 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.


Summary

Summary


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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