Series 3: Chapter Four

Chapter Four

Simple Options and the Futures Market

Options in financial markets have been around for a long time. However, until relatively recently they were bought and sold exclusively over-the-counter. This changed soon after the futures exchanges expanded their commodities trading to include financial products. In 1973 the Chicago Board of Trade organized a new exchange for trading options on stocks. Called the Chicago Board Options Exchange, it standardized the terms of options contracts and assumed the credit risk of the option writer. Its success led to the development of a standardized options market o