Inefficiency Of Trading Options in the 1930s

Trading in options around the 1930’s was an extremely cumbersome process. For one, there was no transparency in bid-ask spreads. And all deals always worked through a phone dealer. The phone dealer would quote bid and ask spreads to any side of the the trade, the buyer or the seller. Because of the lack of transparent information around the buying and selling of contracts, these dealers would establish very wide bid and ask spreads, and hence, profit handsomely on the spread. Exercising an option was also a rather cumbersome process. One who intended to exercise must present themselves in person physically to initiate the exercise process.

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