The first “YOLO” trade in history
How one philosopher made the first recorded options/futures trade
Futures and options are considered derivatives. Trading these derivatives seems to be gaining popularity recently. We’re going to be going back in time though, to visit the philosopher that seems to have made the first future/options trade in recorded history, depending on the story.
Thales of Miletus was an ancient Greek philosopher, known for his work in math and science, including perhaps Thales’s Theorem. Today we’ll be looking at his use of science and the concept of a derivative to become wealthy, or rather to show everyone that he could become rich if he wanted. At the time philosophy was looked down upon as most thought it was a useless hobby.
Thales of Miletus was said to be poor, at least by the standards of the time. So if his bet failed, it could have left him completely broke.
Using his math, science and engineering skills, he predicted the solar eclipse of 585 BC, which earned him some credibility and perhaps confidence for what he was about to do next.
Sometime after the eclipse, he used weather patterns to predict that the next season’s olive harvest would prove to be better than expected. On the basis of this prediction, he allegedly bought all the olive presses in the area during the winter season. Olive pressers were ancient Greek machines used to extract the olive oil from olive paste. During the time of Thales, olive oil was a much sought after commodity, almost comparable to how we treat oil today. Since Thales purchased the machines in the winter season while the harvest was still speculative, he was able to pay a much lower price.
When the olive harvest proved to be much better than expected, it was said he made a fortune. Essentially controlling a monopoly on olive pressing in the area.
The other version of the story alleges that Thales “rented” the olive presses in advance for an upfront fee. When the olive harvest proved to be better than expected, he was able to charge users well above what he paid to reserve the machines.
The first example would prove to be the first futures trade/bet, while the latter would be an example of the first options bet. In any case, it is an example of taking a speculative position based on future value and perhaps the first in recorded history.
One thing to note though. This story may have simply been attributed to Thales. The most cited and original source is from Aristotle. Aristotle himself sheds some doubt on the story, implying it was attributed to Thales simply because it was a story about being smart and well… Thales was considered really smart. At this point its sad to say, we’ll probably never know the true story.
Either way, its entertaining to think the first “yolo” options trade came from a Greek philosopher.
