Who invented options trading?

Russell Sage, a well-known American financier born in New York, was the first to create call and put options to trade in the United States in 1872. Today's options and futures markets originated centuries ago. This may surprise some investors, who thought that futures and stock options were the exclusive domain of Wall Street power brokers The Chicago Board Options Exchange (CBOE), the largest stock options market, evolved from market pioneers such as Jesse Livermore. The first futures markets were created by Japanese samurai who hoped to take over rice markets, while options date back to the olive trade in ancient Greece. While these instruments originated hundreds of years ago in a world very different from ours, their continued use and popularity are a testament to their continued usefulness.

Contracts similar to options have been used since ancient times. The first reputable option buyer was the ancient Greek mathematician and philosopher Thales of Miletus. On one occasion, the season's olive harvest was predicted to be higher than usual, and during the off-season, it acquired the right to use several olive presses the following spring. When spring came and the olive harvest was higher than expected, he exercised his options and then rented the presses at a much higher price than he paid for his “option”.

Most traders were engaged in options trading because they didn't have enough money to buy stocks. Due to the explosive growth of the options market, in 1977 the SEC decided to conduct a comprehensive review of the structure and regulatory practices of all options exchanges. Also underway is the story of a program that allows active serial trading of penny stocks, placing options in the same league as cash stocks. Therefore, today it is very easy for any investor to place an options trade (especially if you do it with Ally Invest).

Options trading continued in an unregulated manner until the Securities and Exchange Commission or SEC was created. To further contribute to the viability of a listed option exchange, in 1973 Fischer Black and Myron Scholes published an article entitled “The Pricing of Options and Corporate Liabilities” in the Journal of Political Economy of the University of Chicago. It changed things even more in 1973, when he helped open the Chicago Board Options Exchange, created to give the men of the Board of Trade something to do when grain markets were slow. When an option is exercised, the cost to the option holder is the strike price of the purchased asset plus the premium, if any, paid to the issuer.

The first options were used in ancient Greece to speculate on the olive harvest; however, modern option contracts commonly refer to stocks. The market price of a US-style option usually follows very close to that of the underlying stock, being the difference between the market price of the stock and the strike price of the option. The massive fall of Nikkei after the earthquake caused a hemorrhage in Leeson's trading losses of options. Mortgage borrowers have long had the option of repaying the loan early, which corresponds to an enforceable bond option.

In 1872, a renowned businessman in the United States, Russell Sage, was the first to formally create and introduce call and put options to operate in the U.S. UU. There was no formal stock market yet, but Sage created an activity that was a significant step forward for options trading.