The Jewish History of Futures (and Options)

From Torah to Today, Jews Have Led Way in Derivatives

OMG, CME: Leo Melamed (second left) rings the bell to start trading on the CME, by some measures the largest futures exchange in the world.
getty images
OMG, CME: Leo Melamed (second left) rings the bell to start trading on the CME, by some measures the largest futures exchange in the world.

By Gordon Haber

Published November 19, 2013, issue of November 22, 2013.
  • Print
  • Share Share
  • Single Page

Everyone’s heard of derivatives, options and futures, but the details of how they might save or destroy civilization are so daunting that the simple facts get lost.

Let’s get down to business: A derivative is a financial security (tradable itself) whose value is based on that of an underlying asset. In other words, instead of purchasing, say, 100 shares of Procter & Gamble, you can buy a “call option,” which gives you the right to buy the shares at a certain date and price, or to sell that right. You are in essence betting that the share price of P&G will rise, in which case the value of your option rises — but if it doesn’t, you’re only out the fee for the transaction, or “option premium.”

At this point (if you’re still reading), you might be thinking that the above is a simplification, and you would be right. You might also ask what this has to do with the Jews. The answer to this question is that there is nothing particularly “Jewish” about derivatives. However, given the strong historical associations between Jews and finance, it’s only natural that we would find Jews involved in such transactions.

The story begins with Torah, believe it or not. One financial historian argues that the first recorded instance of an option is in Genesis 29, when Jacob exchanges seven years of labor for the hand of Laban’s shapely daughter Rachel. It was also an early example of a bait and switch scheme — instead of the hot one, Jacob first got the mieskeyt, Leah.

Derivatives were common in the ancient world. The dry air of Mesopotamia has preserved thousands of futures contracts — agreements to deliver commodities like wood or spices sometime in the future at a fixed price — recorded on cuneiform tablets or papyri. In his “Politics,” Aristotle (not a Jew) writes of Thales the Milesian (also not a Jew), who made a fortune by buying options on olive presses and then renting them out at higher prices.

But it seems safe to say that Jews brought derivative trading from Mesopotamia to the Roman Empire and, after the disastrous expulsions from Iberia, to the generally more secure and business-friendly cities of Northern Europe. In the 16th and 17th centuries, derivative trading flourished in places like Bruges, Antwerp and Amsterdam, with Jewish merchants and stockbrokers frequently in the mix.

One such broker was Joseph Penso de la Vega (1650-1692). De la Vega’s father was a converso who, after running afoul of the Inquisition, fled from Spain to Antwerp in order to openly practice Judaism. The family ended up in Amsterdam, where Joseph established himself as one of those enviable polymaths, a successful speculator and respected author of prose, poetry and plays in Spanish and Hebrew.

In 1688, de la Vega published his masterwork, “Confusión de Confusiones.” Written in Spanish, the book explains the inner workings of the Amsterdam Stock Exchange, including a number of forms of derivatives. De la Vega seems to have preferred options, considering them less risky than other forms of trading.

But “Confusión de Confusiones” is more than just a kind of early how-to manual. De la Vega had a novelist’s eye for the telling detail, describing the “unpleasant smells of perspiration” in the Exchange, the wheeling and dealing in Amsterdam coffee houses, wherein “one person takes chocolate, the others coffee, milk, and tea; and nearly everybody smokes while conversing.”

De la Vega seems to have been an honest sort, or at least the book gives that impression. He was clear-eyed about the dubious ethics of many traders. “The best and most agreeable aspect of the new business is that one can become rich without risk,” writes de le Vega, with no small irony. “Just as the Hebrews, when they are seriously ill, change their names in order to obtain relief, so a changing of name is sufficient for the speculator who finds himself in difficulties.”

Derivatives must have played a part in the rise of the great Jewish financier families of the 19th century, such as the Rothschilds and the Lazards. But in their cases it is harder to find historical data. Their clients, whether they were the Bank of England or the Prussian royal family, preferred secrecy. In addition, family networks could be less formal in their agreements with each other — Nathan Rothschild in London wouldn’t need a written contract when doing business with his brother James in Paris. Discretion was also preferable due to various attempts by European governments to regulate derivative trading — which, then as now, tended to be ineffective.


The Jewish Daily Forward welcomes reader comments in order to promote thoughtful discussion on issues of importance to the Jewish community. In the interest of maintaining a civil forum, The Jewish Daily Forwardrequires that all commenters be appropriately respectful toward our writers, other commenters and the subjects of the articles. Vigorous debate and reasoned critique are welcome; name-calling and personal invective are not. While we generally do not seek to edit or actively moderate comments, our spam filter prevents most links and certain key words from being posted and The Jewish Daily Forward reserves the right to remove comments for any reason.





Find us on Facebook!
  • “This is a dangerous region, even for people who don’t live there and say, merely express the mildest of concern about the humanitarian tragedy of civilians who have nothing to do with the warring factions, only to catch a rash of *** (bleeped) from everyone who went to your bar mitzvah! Statute of limitations! Look, a $50 savings bond does not buy you a lifetime of criticism.”
  • That sound you hear? That's your childhood going up in smoke.
  • "My husband has been offered a terrific new job in a decent-sized Midwestern city. This is mostly great, except for the fact that we will have to leave our beloved NYC, where one can feel Jewish without trying very hard. He is half-Jewish and was raised with a fair amount of Judaism and respect for our tradition though ultimately he doesn’t feel Jewish in that Larry David sort of way like I do. So, he thinks I am nuts for hesitating to move to this new essentially Jew-less city. Oh, did I mention I am pregnant? Seesaw, this concern of mine is real, right? There is something to being surrounded by Jews, no? What should we do?"
  • "Orwell described the cliches of politics as 'packets of aspirin ready at the elbow.' Israel's 'right to defense' is a harder narcotic."
  • From Gene Simmons to Pink — Meet the Jews who rock:
  • The images, which have since been deleted, were captioned: “Israel is the last frontier of the free world."
  • As J Street backs Israel's operation in Gaza, does it risk losing grassroots support?
  • What Thomas Aquinas might say about #Hamas' tunnels:
  • The Jewish bachelorette has spoken.
  • "When it comes to Brenda Turtle, I ask you: What do you expect of a woman repressed all her life who suddenly finds herself free to explore? We can sit and pass judgment, especially when many of us just simply “got over” own sexual repression. But we are obliged to at least acknowledge that this problem is very, very real, and that complete gender segregation breeds sexual repression and unhealthy attitudes toward female sexuality."
  • "Everybody is proud of the resistance. No matter how many people, including myself, disapprove of or even hate Hamas and its ideology, every single person in Gaza is proud of the resistance." Part 2 of Walid Abuzaid's on-the-ground account of life in #Gaza:
  • After years in storage, Toronto’s iconic red-and-white "Sam the Record Man" sign, complete with spinning discs, will return to public view near its original downtown perch. The sign came to symbolize one of Canada’s most storied and successful Jewish family businesses.
  • Is $4,000 too much to ask for a non-member to be buried in a synagogue cemetery?
  • "Let’s not fall into the simplistic us/them dichotomy of 'we were just minding our business when they started firing rockets at us.' We were not just minding our business. We were building settlements, manning checkpoints, and filling jails." What do you think?
  • from-cache

Would you like to receive updates about new stories?




















We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.