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Options History


Description: Options Trading, Options History, CBOT, CBOE, Trading, Exchange, S&P 500, DJI, S&P 100

Options are contracts between two parties in which one party has the right and the other party has the obligation to buy or sell a specified amount of assets at a specified price. Basically the options allow to secure the future price of the assets.

It is difficult to say when the options started to trade first, however, from the history we mention that Romans and Phoenicians used similar contracts in shipping. The history also mention Thales - the mathematician and philosopher in ancient Greece - who secured the future price of the oil and later when the olive price went up, sold them at higher price.

In Europe the options started to attract tulip dealers in early 1600s who wanted to secure the reasonable price in the future. However, very soon the options started to attract speculators.

In North America the options appeared in early 19th century, basically at the same time when stocks started to trade. However at that time options were not traded on the Exchanges and it was up to an options buyer to find an options seller. In majority cases it was done through newspaper advertising.

1848 is considered an official year when options started to trade. On this year Thomas Dyer opened Chicago Board of Trade (CBOT) and became the first precedent CBOT. Later the Kansas City Board of Trade, the Minneapolis Grain Exchange, and the New York Cotton Exchange started to trade.

In 1934 (after the big depression) the options trading lay under the supervision of Securities and Exchange Commission (SEC).

At that time options trading was not very popular and by 1968 the annual trading options volume still did not exceeded 300K contracts.

The big jump in options trading comes to 1968 the year when the Chicago Board Options Exchange (CBOE) was opened for options trading. It was the first U.S. options exchange. On April 26, 1968 - first day of trading on CBOE - only 911 options contracts were traded, yet, in a few years, in early 70's the daily volume already exceeded 200,000 contracts by the end of 1974. One of the reasons of such volume growth was new laws that gave right to banks and insurance companies to include options in their portfolios.

Staring from 1975 the other exchanges started to trade listed options: the American Stock Exchange (AMEX), the Pacific Stock Exchange (PSE) and the Philadelphia Stock Exchange (PHE).

Another important stem that attracted new investors into options trading was in 1977 when put options started to trade - by that time only call options were traded on the market. The put options were issued only on 5 stocks. The puts were enthusiastically accepted by traders and already in 1979 the annual options traded volume hit 35.4 million contracts.

The big interest in options pushed Exchanges to start trading options on indexes and in 1983 the first options on the indexes were launched by CBOE. On March 11, 1983 - S&P 100 (OEX) option and on July 1 1983 - the S&P 500 Index (SPX) options trading were launched. Later in 1997 the DJX options were added to the list of index options.

In 1985 the NASDAQ Stock Exchange and NYSE (New York Stock Exchange) started to list the equity options.

The interest in options trading was growing and in 1999 alone, the CBOE doubled. Almost 60 million open options contracts were by the end of 1999.

A trader interested in options could find a various number of offered options - equities options, index options, currency options, futures options. The great leverage and liquidity, growing number of online options brokerage companies and trading platforms attracts more and more investors.

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