Beginners guide on options contracts
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Every product and especially a financial product has been created to cover a specific need. In our case, options contracts have been created to mitigate risk from one person to another.
In ancient Greece, Thales from Miletus (600 BC) is considered the first who made this kind of risk mitigation, and Wikipedia describes the story as…
The first reputed option buyer was the ancient Greek mathematician and philosopher Thales of Miletus. On a certain occasion, it was predicted that the season’s olive harvest would be larger than usual, and during the off-season, he acquired the right to use a number of olive presses the following spring. When spring came and the olive harvest was larger than expected he exercised his options and then rented the presses out at a much higher price than he paid for his ‘option’.
Before 1848, option contracts were traded outside an exchange. That year this whole market changed because the Chicago board of trade (CBOT) was established. The market, as we know it today, came to be in the 70s with the standardization of the product, price, and the offering on the put options. In 2005 the first weekly options were created.
