Many people think that options and futures are recent inventions. However, options have a long history,going back to ancient Greece.As recorded by Aristotle in Politics, the fifth century BC philosopher Thales of Miletus took part in a sophisticated trading strategy. The main point of this trade was to confirm that philosophers could become rich if they so chose. This is perhaps the first rejoinder to the famous question “If you are so smart, why aren’t you rich?” which has dogged academics throughout the ages.

Thales observed that the weather was very favourable to a good olive crop, which would result in a bumper harvest of olives. If there was an established Athens Board of Olives Exchange, Thales could have simply sold olive futures short (a surplus of olives would cause the price of olives to go down). Since the exchange did not exist, Thales put a deposit on all the olive presses surrounding Miletus. When the olive crop was harvested, demand for olive presses reached enormous proportions (olives were not a storable commodity). Thales then sublet the presses for a profit. Note that by placing a deposit on the presses, Thales was actually manufacturing an option on the olive crop, i.e. the most he could lose was his deposit. If had sold short olive futures, he would have been liable to an unlimited loss, in the event that the olive crop turned out bad,and the price of olives went up. In other words, he had an option on a future of a non-storable commodity.