History of Options

Chicago Board Options Exchange

About 5 years ago, I wrote about the first offerings in options. In the late 1960s, as exchange volume for commodities began to shrink, the Chicago Board of Trade (CBOT) explored opportunities for diversification into the options market. Joseph W. Sullivan, Vice President of Planning for the CBOT, studied the over-the-counter option market and concluded that two key ingredients for success were missing. First, Sullivan believed that existing options had too many variables. To correct this, he proposed standardizing the strike price, expiration, size, and other relevant contract terms. Second, Sullivan recommended the creation of an intermediary to issue contracts and guarantee settlement and performance. Formed in 1973, this intermediary is now known as the Options Clearing Corporation.
Finance Magnates, previously Forex Magnates, has great industry news and education. One of their contributors, Zoe Fiddes, has produced a series of articles that demands republishing.  Here is her first installment entitled, The Options Game: Part 1 – Evolution. In the article, it includes a conversation with Professor Menachem Brenner, co-inventor of the Volatility Index (VIX) to give some perspective of the history of options trading on the Chicago Board Of Options Exchange (CBOE).  Enjoy the article!  Read it here.

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