1. Ying Xie BA 543 Spring 2013 May, 21st History of Options

2. About 1700 BC Genesis 29 of the Bible 1700 B.C 624 BC-547 BC About 624 BC-547 BC Thales of Miletus ----Olive Harvest 1634-1637 Tulip Mania in Holland 1973 About 1700-1733 Options trading in London 1973-Present Chicago Board Options Exchange Opens T IMELINE OF O PTIONS T RADING D EVELOPMENT 1872 Options Trading in USA--- Russell Sage Options

3. A NCIENT H ISTORY OF O PTIONS Genesis 29 of the Bible (1700 BC)

4. A NCIENT H ISTORY OF O PTIONS 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.

5. E ARLY H ISTORY OF O PTIONS 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

6. 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.

7. 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 E ARLY H ISTORY OF O PTIONS

8. 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 E ARLY H ISTORY OF O PTIONS

9. 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.

10. C HICAGO B OARD O PTION E XCHANGE 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.

11. S UMMARY

13. R EFERENCES 1.History of Options Trading, http://www.optiontradingpedia.com/history_of_options_trading.htm http://www.optiontradingpedia.com/history_of_options_trading.htm 2. Genesis 29 Bible Study, http://biblestudyoutlines.org/bible-study- lessons/old-testament-bible-study/genesis-29-bible-study/ http://biblestudyoutlines.org/bible-study- lessons/old-testament-bible-study/genesis-29-bible-study/ 3.The History of Options Trading, http://ezinearticles.com/?The-History-of- Options-Trading&id=6416873http://ezinearticles.com/?The-History-of- Options-Trading&id=6416873 4.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/ http://leightonvw.com/2013/04/01/how-an-ancient-greek-philosopher-bet-on- the-future-and-won/ 5.Chicago Board Option Exchange History, http://www.cboe.com/aboutcboe/History.aspx http://www.cboe.com/aboutcboe/History.aspx 6.A Short History of Options, http://www.tradingmarkets.com/recent/a_short_history_of_options- 677437.html http://www.tradingmarkets.com/recent/a_short_history_of_options- 677437.html