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OSU BA 543 - History of Options Trading

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History of Options TradingOverviewDefinitionAncient history of optionsHistory of optionsHistory of optionsEarly Options in AmericaHistory of Chicago Board Option ExchangeSlide 9Option Clearing CorporationOptions TradingSummaryHistory of Options Trading By Viktoriya CherkassovaOverviewAncient history of optionsEarly Options in AmericaHistory of Chicago Board Option ExchangeThe Option Clearing CorporationSummaryDefinition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 (stock, bond, futures contract, etc.) at a specified price within a specified time.Ancient history of optionsRomans and Phoenicians Romans and Phoenicians used contracts similar to options in shippingused contracts similar to options in shipping Thales of Miletus (624BC-547BCThales of Miletus (624BC-547BC))Greece mathematician and philosopher used Greece mathematician and philosopher used options to secure a low price for olive presses in options to secure a low price for olive presses in advance of the harvest advance of the harvestHistory of optionsThe Tulip-Bulb Craze1634-1637 Holland1634-1637 Hollandtulip dealers used call options to secure a tulip dealers used call options to secure a reasonable price to meet the demandreasonable price to meet the demand tulip growers used put options to ensure tulip growers used put options to ensure an adequate selling price an adequate selling priceHistory of options1650 - Yodoya rice market in Osaka, Japan Royal Exchange in London permitted forward contracting United Kingdom in 1711-1720 The South Sea Company purchased the "rights" to all trade in the South Seas.Early Options in AmericaIn the early 19th Century, call and put "privileges" were trade over-the-counter wasn't much in the way of a secondary marketall option contracts had to be exercised in personthe terms were differed for each contract In the mid 1800s, New York financier Russell Sage began creating synthetic loans using the principle of put-call parityHistory of Chicago Board Option ExchangeIn the late 60th Joseph W. Sullivan, Vice President of Planning for the CBOT proposed:standardizing the strike price, expiration, size, and other relevant contract terms create a mediator to issue contracts and guarantee settlement and performance (Options Clearing Corporation )History of Chicago Board Option ExchangeApril 26, 1973 CBOE began trading on standardized, listed options.  the first day of trading:only call option911 contracts traded on 16 underlying stocks.By the end of 1974, average daily volume exceeded 200,000 contracts In 1975 the American Stock Exchange, Inc. (Amex) and the Philadelphia Stock Exchange, Inc. (PHLX) begin trading equity options. Both become OCC participant exchangesOption Clearing Corporationfounded in 1973, is the world's largest equity derivatives clearing organization operates under the jurisdiction of both the SEC and the CFTCclears transactions for put and call options on common stocks and other equity issuesequally owned by five participant exchanges that trade options: American Stock Exchange, Chicago Board Options Exchange, International Securities Exchange, Pacific Exchange and the Philadelphia Stock ExchangeOptions Trading The Black-Scholes model 1983 the CBOE created an option on an index of stocks. S&P 100, which remains the most actively traded exchange-listed option.1985, The New York Stock Exchange begins listing equity options. Options on NASDAQ stocks are listed October 1987, stock market


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OSU BA 543 - History of Options Trading

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