The earliest recorded example of options was referred to in a book written in the mid fourth century BC by Aristotle, a Greek philosopher of great influence and writer on many subjects. In this book, entitled "Politics", Aristotle included an account about another philosopher, Thales of Miletus, and how he had profited from an olive harvest.
Thales had great interest in, among other things, astronomy and mathematics and he combined his knowledge of those subjects to create what were effectively the first known options contracts. By studying the stars, Thales managed to predict that there would be a vast olive harvest in his region and set out to profit from his prediction. He recognized that there would a significant demand for olive presses and wanted to basically corner the market.
However, Thales didn't have sufficient funds to own all the olive presses so he instead paid the owners of olive presses a sum of money each in order to secure the rights to use them at harvest time. When harvest time came around, and as Thales had predicted, it was indeed a huge harvest, Thales resold his rights to the olive presses to those who needed them and made a sizable profit.
Although the term wasn't used at the time, Thales had effectively created the first call option with olive presses as the underlying security. He had paid out for the right, but not the obligation, to use the olive presses at a fixed price and was then able to exercise his options for a profit. This is the basic principle for how calls work today; now we have other factors such as financial instruments and commodities instead of olive presses as the underlying security.
PaisaToBanega Options School
Paisa To Banega Options School - Bonus Learnings:
Thales and the Olive Harvest
The earliest recorded example of options was referred to in a book written in the mid fourth century BC by Aristotle, a Greek philosopher of great influence and writer on many subjects. In this book, entitled "Politics", Aristotle included an account about another philosopher, Thales of Miletus, and how he had profited from an olive harvest.
Thales had great interest in, among other things, astronomy and mathematics and he combined his knowledge of those subjects to create what were effectively the first known options contracts. By studying the stars, Thales managed to predict that there would be a vast olive harvest in his region and set out to profit from his prediction. He recognized that there would a significant demand for olive presses and wanted to basically corner the market.
However, Thales didn't have sufficient funds to own all the olive presses so he instead paid the owners of olive presses a sum of money each in order to secure the rights to use them at harvest time. When harvest time came around, and as Thales had predicted, it was indeed a huge harvest, Thales resold his rights to the olive presses to those who needed them and made a sizable profit.
Although the term wasn't used at the time, Thales had effectively created the first call option with olive presses as the underlying security. He had paid out for the right, but not the obligation, to use the olive presses at a fixed price and was then able to exercise his options for a profit. This is the basic principle for how calls work today; now we have other factors such as financial instruments and commodities instead of olive presses as the underlying security.
Hope you enjoyed this Bonus Learning in Options.
4 years ago | [YT] | 9