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I want to ask a question about the standardization of options to a lot size of 100 shares per options contract.

I was reading the following article which mentions the standardization of options in 1973:

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. This made the option market highly illiquid as the terms for each contract might be different. Once stock options were standardized, it meant that 1 contract = 100 shares of stock (although there are exceptions). In addition to the size of the contract, the expiration date and strike price were also standardized.

It later continues to mention the Chicago Board Options Exchange:

In 1973, the Chicago Board Options Exchange (CBOE) became the first U.S. exchange to trade listed stock options. The CBOE offered call-option trading on 16 different stocks. Before this, there was no exchange set up to match buyers and sellers of option contracts.

However, at first I could not find a primary source that could confirm this taking place. Investopedia here mention the first standardized contract took place in 1973 as well, but they cite a study published by the SEC that mentions only the following sentence on the matter:

Since 1973, United States exchanges have listed and traded standardized options on equity securities.

A text published by the US Congress of Technology Assessment titled "Electronic bulls and bears: U.S. securities markets and information technology" states that the "CBOE created modern options by pioneering two concepts: contract standardization" and adds that *Over-the-counter (OTC) options writing nearly disappeared after 1973".

Finally, Sheldon Natenberg writes a similar commentary in his book, Option Volatility Trading Strategies (link here):

Though options have been around in one form or another for several centuries, the modern era of options trading didn’t begin until 1973, when standardized equity options were first introduced by the Chicago Board Options Exchange (CBOE).

However, I could not find a source, article or original announcement dated from 1973 confirming the standardization of options to 100 shares per lot. I was not sure of the chronology of the events leading to the standardization, although the references suggest that there was difficulty in matching buyers and sellers in the exchange when the sizes of shares being bought and sold could be anything from 1 share to e.g. 1000.

What led the U.S. to standardize option contracts to 100 shares per lot, and is there an original source that shows this being reported in 1973, as speculated by the references above?

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  • An article at SEC mentions a release in footnote 8 See Release No. 34-9985 (February 1, 1973). Might be a place to start.
    – justCal
    Mar 26 at 11:58
  • My vague recollection is that a standard lot of shares was 100 when buying from a broker. Less than 100 was an ‘odd lot’ and had added costs.
    – Jon Custer
    Mar 26 at 14:32

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Longer than a comment, but not fully an answer:

Wikipedia has a short article on the Odd lotter, someone who trades in odd lots (less than 100 shares). This then led to 'Odd lot theory', one of many technical analysis proposals, where the 'odd lotter' was assumed to be an uniformed small investor who could be taken advantage of. The article claims the theory was common in the 1960's and 1970's. The term itself, 'odd lot', per dictionary.com goes back to 1895-1900.

An options board would want to trade in readily fungible things - specific quantities of whatever. Since the standard size of stock transactions was 100 shares, it only makes sense that they would use that quantity. Remember, this was when actual physical stock certificates were issued to you, so there was a not-insignificant cost to the transaction in the first place.

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