Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. Join them; it only takes a minute:

Sign up
Here's how it works:
  1. Anybody can ask a question
  2. Anybody can answer
  3. The best answers are voted up and rise to the top

This may be a very obvious question, but can someone tell me where and when the names call and put originated? And similarly, where do the terms American and European option come from? Aside from the explanation that it has nothing to do with the continents, I have not seen a textbook that says anything about why they are called that way.

share|improve this question
up vote 5 down vote accepted

Regarding the terms 'American' and 'European':

Though primary sources are scarce, it is likely that privilege trading in the US was present from the late 18th century beginnings of trade in securities, perhaps earlier in the produce markets. Over time, this trade developed differently from Europe due to differing settlement practices. In the US, “each day is a settling day and a clearing day for transactions of the day before ... This is a marked difference from European practice” where “trading for the account” (prolongationsgeschäfte) involves monthly or fortnightly settlement periods with allowance for continuation of the position until the next settlement date (Emery 1896, p.82). The continuation process for a buyer seeking to delay delivery involves the immediate sale of the stock being delivered and the simultaneous repurchase for the next settlement date. As this transaction would involve the lending of money, an additional ‘contango’ payment would typically be required. As a consequence of these settlement differences, in the US (American) options developed with fixed exercise prices, possible exercise prior to delivery and premiums paid in advance. In Europe, premiums for (European) options would be due on the scheduled future delivery date which coincided with a regular settlement date, exercise could only take place on the delivery date and the exercise price would be adjusted to determine a market clearing ‘price’ for the option at the time of purchase.

From "The Early History of Options Contracts" by Geoffrey Poitras.

share|improve this answer
Thank you very much for the source. – pbr142 May 1 '14 at 13:03

Call and put are more or less obivous. For the expression "European" and "American" I once read that "American" options are more complex and "European" options are easier. So somebody (I just googled the story but didn't find it) thought that "easier" should be called "European". This does not fully answer you question but maybe somebody finds the source.

EDIT: I just read in this German link that American options used to be traded in the US only and European only in Europe ... I wonder whether this is correct ...

share|improve this answer
Just a remark: I dont think he would ask why they were called put and call if HE thought it was obvious. – Good Guy Mike Apr 29 '14 at 15:00
You are right of course. I am not an English native speaker (not hard to guess ;)) but isn't it true that "to call something" and "to put something" can be interpreted as "to buy" or "plan to buy" resp. "plan to sell" ... "plan" is not the right word. – Richard Apr 29 '14 at 15:48
In the following links they explain that the owner of a call option has the right to "call the stock away" from the writer of the option and the owner of a put option has the right to put it to someone else. – Richard Apr 29 '14 at 15:56
I do understand why the names are "intuitive". The question was aimed at getting a source where and when the names originated. For example, when the CBOE started option trading (I think in 1973), the names calls and puts was already well established. I am looking for a source, similar to TimHussonSLCG's answer, that discusses the origins of the names. – pbr142 May 1 '14 at 13:05
TimHussonSLCG 's answer is much better, I agree ;) – Richard May 2 '14 at 9:43

Your Answer


By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.