The History Of Options Contracts


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Today's commodities market is also highly regulated.

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Professional trading platforms Our suite of powerful trading platforms was designed to meet the demanding needs of currency traders. Powerful trading platforms Trade on a suite of powerful trading platforms designed to meet the demanding needs of active traders looking for maximum performance, flexibility and speed. The most reported financial instruments that investors are used to hearing about on the business news are stock options and futures.

Many serious investors and traders wake up in the morning and sneak a peek at the stock futures to get a sense of where the market will open relative to the previous day's close. Others may look at the price of oil contracts or other commodities to see if money can be made by hedging their bets during the trading day. You might assume these futures contracts or options markets are another sophisticated financial instrument that Wall Street gurus created for their own disingenuous purposes, but you would be incorrect if you did.

In fact, options and futures contracts did not originate on Wall Street at all. A futures contract enables holder to buy or sell a particular quantity of a commodity over a certain time frame for a particular price. Commodities include oil, corn, wheat, natural gas, gold, potash and many other heavily traded assets. These derivatives are commonly used by a broad range of market participants ranging from Wall Street speculators to farmers who want to ensure consistent profits on their agricultural goods.

To learn more, check out Commodity Investing The Japanese are credited with creating the first fully functional commodities exchange in the late 17th century. The so-called elite class in Japan at the time was known as the "samurai".

During this time frame, the samurai were paid in rice, not yen, for their services. They naturally wanted to control the rice markets , where the bartering and brokering of rice took place. By establishing a formal market in which buyers and sellers would "barter" for rice, the samurai could earn a profit on a more consistent basis. Working closely with other rice brokers, the samurai started the "Dojima Rice Exchange" in This system was much different from the present Japanese agricultural exchange, the Kansai Derivative Exchange.

The futures markets can seem daunting, but these explanations and strategies will help you trade like a pro. Today's futures markets differ greatly in scope and sophistication from the barter systems first established by the Japanese.

As you might suspect, technological advances have made trading options and futures more accessible to the average investor. The majority of options and futures are executed electronically and go through a clearing agency called the Options Clearing Corporation OCC.

Another feature of today's options and futures markets is their global reach. Most major countries have futures markets and futures exchanges on products ranging from commodities, weather, stocks and now even Hollywood movie returns. The futures market, much like the stock market, has global breadth. The globalization of futures exchanges is not without risk. If not for government intervention, the outcomes for the stock and futures markets may have been much worse.

The first options were used in ancient Greece to speculate on the olive harvest; however, modern option contracts commonly refer to equities.

So what is a stock option and where did they originate? Simply put, a stock option contract gives the holder the right to buy or sell a set number of shares for a pre-determined price over a defined time frame.