Option, History of Option Trading articles by calloptionputoption.com

Home || NSE || BSE || Contact Us || Disclaimer || Privacy Policy || Subscribe Us || Help || Cancellation & Refund || Terms & Conditions

OPTION MASTERS attains ISO 9001:2008 Certification for Stock Equity and Commodity Research for National & International Market.

Market Dictionary:- Stock Market Dictionary | Option Dictionay | Derivatives Dictionary | IPO Dictionary | Mutual Fund Dictionary

Market Watch Live:- Indian Market | World Market | Forex Market | Commodity Market | World Market Future

Option, History of Option Trading

Before discussing the history of option trading we should know what is actually option trading. It is an agreement between a buyer and a seller to sell a financial asset at an agreed fixed price by both parties before the expiration date of the agreement. It is called option trading because the buyer has got the option to decide whether to purchase the asset or not. So, there is no obligation on the buyer but the seller is obligated to sell the assets if buyer chooses to buy.

History

It is not known exactly that when the first option trading took place but the history shows that Romans and Phoenicians used option trading kind of contracts for their shipping sector. Other evidences show that a famous mathematician and philosopher Thales used option trading to invest in lower price of olive presses before the harvest season. During the off season when demand for olive presses decreases he used those olive presses at a very low cost and when the harvest season used to be at its peak Thales took his option and rented the olive press equipment to others at a very high price.
Besides these evidences another shows that in Holland option trading was practiced in 1600s and a 100 years later in London. But unfortunately due to the joining of speculators who traded options for profits only, both economies crashed and at one time option trading was even declared as an illegal form of trading.
History shows that in early 19th century America started doing business in option trading and only after the evolution of options trading in America this type of trading embossed its marks and was regarded as a legal form of trading all over the world. During the start the option trading did not have a proper format the buyers and sellers had to seek for each other there was no proper structure of a market for this type of trading but in the mid of 19th century option trading progressed to the form in which it is present nowadays.

So, we can conclude that the study of history shows that option trading has been a form of trading since the beginning of 16th century.