I write about money and markets. Edmund “Eddie” O'Connor passed away early on Jan. 17, 2011 at age 85.

When was derivative trading invented?

The first recorded example of a derivative transaction dates back to around 600 BCE in ancient Greece, when philosopher Thales of Miletus become the world's first oil derivatives trader – olive oil, that is.

Who founded options trading?

Russell Sage and Put & Call Brokers. A notable development in the history of options trading involved an American financier by the name of Russell Sage. In the late 19th century, Sage began creating calls and puts options that could be traded over the counter in the United States.

Why derivative market was created?

During the nineteenth century, America was at its pinnacle of economic progress. America was the center of innovation. One such innovation came in the field of exchange traded derivatives when farmers realized that finding buyers for the commodities had become a problem.

What was the first derivative contract?

The oldest example of a derivative in history, attested to by Aristotle, is thought to be a contract transaction of olives, entered into by ancient Greek philosopher Thales, who made a profit in the exchange.

Derivatives Trading Explained

32 related questions found

When did derivatives trading start in India?

The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with the launch of index futures on June 12, 2000. The futures contracts are based on the popular benchmark Nifty 50 Index. The Exchange introduced trading in Index Options (also based on Nifty 50) on June 4, 2001.

How are the Greeks determined options?

Greeks, including Delta, Gamma, Theta, Vega and Rho, measure the different factors that affect the price of an option contract. They are calculated using a theoretical options pricing model. ... If we know that an option loses value over time, we can use Theta to approximate how much value it loses each day.

What is Delta Vega Gamma?

Gamma measures delta's rate of change over time, as well as the rate of change in the underlying asset. Gamma helps forecast price moves in the underlying asset. Vega measures the risk of changes in implied volatility or the forward-looking expected volatility of the underlying asset price.

Why options are introduced?

Options were used in order to lock in prices for both selling and purchasing crops. One of the most important changes to the stock option market in the U.S. States is known as standardization. Before 1973, option buyers made individual contract agreements with option sellers.

Who is the father of derivatives?

Hancock has dual U.S. and U.K citizenship; "He grew up in Hong Kong, was educated in England and has worked in London, Tokyo and New York, where he has been a resident since 1986," Dow Jones reports. He's been described as "father of credit derivatives," a title earned through twenty years with JP Morgan.

Who invented futures?

From the 1940s through the 1980s, he helped generations of curious skywatchers envision what it would be like to be . . . out there, where no one had gone before. Bonestell (“BONN-uh-stell”) became a pivotal force in inventing a future that propelled men and women to reach moons, planets, and stars.

Who writes option contracts?

An option writer, also known as a granter or seller, is someone who sells an option and collects a premium from the buyer, by opening a position. The answer to who is option writer is that it is someone who creates a new options contract and sells it to a trader seeking to buy that contract.

What is difference between future and option?

A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. ... An options contract gives the buyer the right to buy the asset at a fixed price. However, there is no obligation on the part of the buyer to go through with the purchase.

What is future trading Crypto?

What is futures trading? Futures, or futures contracts, are an agreement to buy or sell an asset at a later date for a fixed price. They are typically used by traders as a way to hedge other investments or to lock in profits when trading in volatile markets.

What is Theta option Greek?

The Greek that measures an option's sensitivity to time is theta. ... Theta is highest for at-the-money (ATM) options and lower the further out-the-money or in-the-money the option is. The absolute value of theta of an option that is at- or near-the-money rises as the option approaches expiration.

What is IV in stock market?

Implied volatility is the market's forecast of a likely movement in a security's price. ... When applied to the stock market, implied volatility generally increases in bearish markets, when investors believe equity prices will decline over time. IV decreases when the market is bullish.

What is Theta stock market?

Theta refers to the rate of decline in the value of an option over time. If all other variables are constant, an option will lose value as time draws closer to its maturity. Theta, usually expressed as a negative number, indicates how much the option's value will decline every day up to maturity.

What does Vega mean in options?

Vega measures the amount of increase or decrease in an option premium based on a 1% change in implied volatility. Vega is a derivative of implied volatility. Implied volatility is defined as the market's forecast of a likely movement in the underlying security.

What is the delta of an option?

Delta measures the degree to which an option is exposed to shifts in the price of the underlying asset (i.e., a stock) or commodity (i.e., a futures contract). ... Generally speaking, an at-the-money option usually has a delta at approximately 0.5 or -0.5.

What is delta and gamma in options?

Effectively, Delta is a measure of the rate of change in the option premium whereas gamma measures the momentum. In other words, gamma measures movement risk. Like delta, the gamma value will also ranges between 0 and 1. Gammas are linked to whether your option is long or short in the market.

Is Nifty 50 a derivative?

The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with the launch of index futures on June 12, 2000. The futures contracts are based on the popular benchmark Nifty 50 Index. ... Currently, Derivatives on NIFTY 50, Nifty Bank and Nifty Financial Service are available for trading.

Who controls derivative market in India?

1.1 In India, different derivatives instruments are permitted and regulated by various regulators, like Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Forward Markets Commission (FMC).

When did Nifty started in India?

The base period for the NIFTY 50 index is 3 November 1995, which marked the completion of one year of operations of the National Stock Exchange Equity Market Segment. The base value of the index has been set at 1000 and a base capital of ₹ 2.06 trillion.

What is PE and CE?

CE - Call option European-style settlement. PE - Put option European-style settlement. CA - Call option American-style settlement. PA - Put option American-style settlement. European-style options can be exercised only on the expiry day while American-style options can be exercised any time prior to expiry.

What is hedge trading?

What Is Hedging? ... Hedging against investment risk means strategically using financial instruments or market strategies to offset the risk of any adverse price movements. Put another way, investors hedge one investment by making a trade in another.