History of Options: From Olive Presses to a Trillion-Dollar Market
An option gives the holder the right — but not the obligation — to buy or sell an asset at a specified price before a certain date. Options are often seen as a modern financial product, but the concept dates back to ancient Greece. Today, U.S. options markets trade billions of contracts annually.
Ancient Origins: Thales of Miletus
The earliest known options trade is attributed to the Greek philosopher Thales of Miletus around 600 BC. According to Aristotle, Thales predicted a large olive harvest and paid small deposits to secure the right to use olive presses at a fixed price. When the harvest came and demand for presses surged, Thales exercised his options and rented the presses at a profit.
This is essentially a call option — Thales paid a premium for the right (not obligation) to use an asset at a pre-agreed price.
Key Milestones in Options History
| Year | Event | Significance |
|---|---|---|
| ~600 BC | Thales’ olive press options | Earliest documented options-like transaction |
| 1630s | Dutch tulip options | Options on tulip bulbs during Tulip Mania — many defaulted |
| 1790s | Options traded on Wall Street | Informal “privileges” (calls and puts) traded among Wall Street brokers |
| 1872 | Russell Sage formalizes put/call trading | Created standardized over-the-counter options market in New York |
| 1973 | CBOE opens | Chicago Board Options Exchange — first regulated options exchange |
| 1973 | Black-Scholes model published | Revolutionary pricing formula that made options mathematically tractable |
| 1977 | Put options listed on CBOE | Originally only calls were traded; puts added four years later |
| 1983 | Index options launched | CBOE introduced S&P 100 (OEX) index options |
| 1993 | VIX created | CBOE Volatility Index — the “fear gauge” — based on S&P 500 options |
| 2020s | 0DTE options explosion | Zero-days-to-expiration options become wildly popular among retail traders |
The CBOE Revolution (1973)
The modern options market was born on April 26, 1973, when the Chicago Board Options Exchange (CBOE) opened for trading. Before CBOE, options were traded informally over the counter with no standardization — each contract was individually negotiated.
CBOE changed everything by introducing standardized contracts with fixed strike prices and expiration dates, a central clearinghouse (the Options Clearing Corporation) that guaranteed all trades, and transparent pricing. On its first day, CBOE traded 911 contracts on 16 underlying stocks — only call options. Put options weren’t added until 1977.
Black-Scholes: The Formula That Changed Finance
In the same year CBOE opened, economists Fischer Black, Myron Scholes, and Robert Merton published the Black-Scholes option pricing model. This mathematical framework provided a way to calculate the theoretical fair value of an option based on five inputs: stock price, strike price, time to expiration, risk-free rate, and volatility.
The impact was enormous. For the first time, traders could objectively price options rather than relying on gut feel. The model underpins virtually all modern options pricing and earned Scholes and Merton the 1997 Nobel Prize in Economics (Black had passed away in 1995).
The Greeks and Modern Options Trading
As the options market matured, traders developed sophisticated risk management tools known as “the Greeks” — Delta, Gamma, Theta, Vega, and Rho. These metrics measure how an option’s price changes in response to various factors and allow traders to precisely hedge their positions.
Modern options strategies range from simple covered calls and protective puts to complex multi-leg structures like iron condors and straddles.
The 0DTE Revolution
In the 2020s, zero-days-to-expiration (0DTE) options — contracts that expire the same day they’re traded — became one of the hottest products in finance. By 2023, 0DTE options accounted for over 40% of all S&P 500 options volume. This explosion was driven by retail traders seeking leveraged bets and institutional traders using them for precise daily hedging.
Options have evolved from niche instruments to mainstream tools. But the complexity hasn’t changed — if anything, it’s increased. Before trading options, understand the Greeks, how implied volatility affects pricing, and that most options expire worthless. Start with defined-risk strategies like covered calls.
Key Takeaways
- Options concepts date to ancient Greece (~600 BC), but the modern market began with the CBOE’s founding in 1973.
- The Black-Scholes model (1973) revolutionized finance by providing a mathematical framework for pricing options.
- The market evolved from call-only contracts on 16 stocks to millions of contracts daily across thousands of securities.
- 0DTE (zero-days-to-expiration) options now dominate S&P 500 options volume, reflecting a structural shift in how markets trade.
- Options remain powerful but complex — understanding the Greeks and volatility is essential before trading.
Frequently Asked Questions
When were options first traded?
The earliest known options-like transaction dates to around 600 BC, when the Greek philosopher Thales paid for the right to use olive presses at a fixed price. Modern standardized options trading began in 1973 with the opening of the Chicago Board Options Exchange (CBOE).
What is the Black-Scholes model?
The Black-Scholes model is a mathematical formula published in 1973 by Fischer Black, Myron Scholes, and Robert Merton that calculates the theoretical price of European-style options. It uses five inputs: current stock price, strike price, time to expiration, risk-free interest rate, and volatility. It earned a Nobel Prize and remains the foundation of options pricing.
What are 0DTE options?
0DTE (zero-days-to-expiration) options are contracts that expire on the same trading day. They offer extreme leverage and time decay, making them popular with day traders and institutions. By 2023, they accounted for over 40% of S&P 500 options volume, though they carry significant risk due to rapid time decay.
Why were put options added later than call options?
When the CBOE opened in 1973, it only listed call options. Put options weren’t added until 1977 because regulators wanted to ensure the exchange could handle the operational complexity of one product type before adding another. The SEC approved put listings after four years of successful call trading.
How big is the options market today?
The U.S. options market trades over 10 billion contracts annually as of 2024, with notional values in the trillions. Options are now traded on individual stocks, ETFs, indexes, commodities, currencies, and even volatility itself (VIX options). The market has grown dramatically since the 2020 retail trading boom.