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When Did Stock Option Trading Start?

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Written by Timothy Sykes
Updated 4/20/2023 6 min read

Stock options as we know them started trading in 1973. But the concept goes way back, spanning centuries.

You don’t have to know the history of options to trade them. But successful stock traders always seem to know a lot about the market.

Curious about the history of stock option trading? Read on to learn more!

History of Options

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Options go as far back as the fourth century B.C.E. in ancient Greece.

Aristotle wrote about how Thales of Miletus made profits from a larger-than-expected olive harvest. He rented olive presses before harvest time, and then sold the rights to use them.

The term “option” wasn’t used back then. But we can see what Thales did was buy a call option. He was trading rights, not actual olive presses.

Another prototypical options trade was carried out in 17th-century Holland, where tulips were really popular and widely sought after by nobles. Informal exchanges traded contracts with tulips as the underlying security. They had different names for their options contracts, but they were roughly similar to modern calls and puts.

When tulip bulb mania eventually ended, many options contracts went unfulfilled. The options market was unregulated, so no one could force contract fulfillment. Option holders lost their money and their homes. This resulted in options getting a bad reputation all over the world.

Lots of option holders took too many risks back then and didn’t cut their losses quickly enough. Worse still, most of them used money they couldn’t afford to lose…

Remind you of anyone?

Birth of the US Stock Options Market

19th-century American financier Russell Sage started a new over-the-counter options market. He was the first person to connect option purchase prices, underlying security prices, and interest rates.

Sage’s options market worked by devising synthetic loans. Sage funded these loans by buying shares of stock and a customer’s put option.

This concept allowed him to lend money to options holders at his desired interest rate. He did this by tweaking his contract price and the agreed-upon strike price.

Sage suffered big losses and eventually stopped trading. But his concept endured and played a part in the evolution of options.

The late 19th century also saw put and call brokers rising in popularity. Here’s how it worked:

A trader would contact the broker to buy calls or puts in stock market assets. Then, the broker would find another trader for the other side of the options contract.

This made trading options easier, but the process was still complicated. The option holder and writer still needed to negotiate and agree on every sale.

A case-by-case agreement meant that stock prices and strike prices could vary. Plus, there were still no standards for these types of options trades, so many traders were still wary.

Want to skip to the fun stuff? Read my guide to learning options trading today!

The Emergence of the Listed Options Market

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Options had limited regulation and standardization until recent years. This prevented them from being widely adopted. Traders back then didn’t trust options — they didn’t see it as a fair market.

In 1968, the Chicago Board of Trade wanted to find a new way to grow. They came up with the Chicago Board of Options Exchange (CBOE), which started trading in 1973.

This was the first time options were traded in a standardized and fair market. From that point, options grew in popularity.

Today’s Stock Option Market

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Despite being a fair market, the CBOE still saw some resistance from traders. They found it hard to determine a fair option price.

Fischer Black and Myron Scholes changed that in 1973 with the Black-Scholes Pricing Model. This model calculated an option’s value, convincing many doubtful traders.

Ever calculated an option’s worth and fair purchase price with its delta? That’s based on the Black-Scholes Pricing Model.

Want to learn more about option delta? Read my article on delta in options trading.

The American options market became more popular with index options in 1983. Since then, more than 1 billion index options contracts have been traded, spanning over 50 different indices.

Modern Stock Options

Now, you can trade options from anywhere.

On average, there are 11 million options traded every day. You have lots of exchanges to trade on, like the NYSE Arca, the International Securities Exchange’s group of exchanges, and the CBOE.

Brokers protect new traders by requiring approval to access the options market. Inexperienced traders are only given access to the lowest-risk strategies.

Robinhood is one of the most popular options brokers — check out my guide about options trading on Robinhood here!

Today, there are multiple types of options on numerous underlying assets. You can trade options for stocks, indices, mutual funds, and more. There are even whole communities set up around trading options, like my former student Mark Croock’s Evolved Trader program.

Here’s a sneak peek of Mark’s curriculum:

Sign up for the Evolved Trader program today and start your journey towards becoming a self-sufficient options trader!

It’s easier than ever to start trading options, but it’s also easy to lose money doing it. Trade safe and smart — remember, trading is a marathon, not a sprint.

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”