Options are generally defined as a contract between two
parties in which one party has the right but not the obligation to buy
or sell a specified amount of an underlying security at a specified
price within a specified time.
In North America the options started to trade basically at the same time
as stocks. In the early 19th century, options buyer had to find an
options seller through newspaper advertising.
options investing started in the United States in 1848 when
the Chicago Board of Trade was founded. Thomas Dyer was the first
president of the CBOT. Later the Kansas City Board of Trade, the
Minneapolis Grain Exchange, and the New York Cotton Exchange started to
Due to the low liquidity, the
options investment was not very popular and
by 1968, annual total trading volume was still below 300,000
In 1968 Chicago Board Options Exchange (CBOE) started to function. It
was the first U.S. options exchange. On the first day of trading, on
April 26, 1968, 911 contracts were traded on 16 underlying stocks.
However, very soon the options started to attract speculators and in the
70's, the daily traded volume already exceeded 200,000 options
It's worth to mention that at that time only call options were traded.
The put options started to trade on the CBOE in 1977.
In 1983 the CBOE lunched first options on the indexes. On March 11,
1983, S&P 100 (OEX) options started to trade and on July 1, 1983 the S&P
500 Index (SPX) options trading was launched. The
- options on the
Dow Jones Industrials Average - started to trade only in 1997.
Later in 1985 the equity options became listed on the
NASDAQ Stock Exchange and
NYSE (New York Stock Exchange).
In 1990, the long term options (LEAPS) started to trade.
At the current time wide range of the options are offered on the
equities, indexes, currencies, futures. The great leverage through
trading attracts more and more speculators. Various online
options brokerage companies and trading platforms placed options trading
on the high executable level by delivering real-time options quotes,
options news, charts and indicators directly to the trader's desk.
However, just like 50 and a 100 years ago, the options trading remains a
high risk trading vehicle where an option buyer may loose 100% of the
invested funds and options seller may face unlimited losses.
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