The Creation of Listed Options Among Top Chicago Innovations

The Creation of Listed Options Among Top Chicago Innovations

Over the weekend I was reading through the Chicago Tribune and came across an article by Phil Rosenthal titled – My own list of Chicago’s greatest innovations.  I assumed McDonald’s and the transistor radio (by Zenith) would make the list, but was curious what other innovations had come out of Chicago.  Let’s just say I beamed with pride when right there at number 9 was Modern options trading.  Here’s what Rosenthal said on the subject –

9. Modern Options Trading

The pre-Socratic Greek philosopher Thales of Miletus is said to have bet on the future olive harvest around 300 B.C., and there have been various forms of options investment after that. Its modern form began with the 1973 launch of the Chicago Board Options Exchange.

Chicago, through the Chicago Mercantile Exchange and Chicago Board of Trade, had long played a significant role in the trading of commodities and the establishment of futures trading. The idea for CBOE as an independent operation began at the Board of Trade in response to regulations that kept it from running its own options business.

Options trading enables investors, anticipating changing conditions, to acquire the right but not the obligation to buy or sell some asset or financial instrument at a later date. Before CBOE, options traded over the counter and lacked standardization. CBOE was the first marketplace for trading listed options.

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