Amsterdam as the cradle of modern futures and options trading ...

impossible task of conquering and colonizing the Spanish and Portuguese colonies in Latin
America. Investors proved deeply sceptical about this twin concept. It took two years before
sufficient capital was raised to equip the first ships. Stock prices moved around par until the
accidental capture of Spanish ships laden with silver in 1628. Prices soared to more than 200
in January 1629 but the momentum was quickly lost. 68 Before the end of the year the WIC
had become a prime target for bear speculators, with forward prices dropping from 235 in
March 1629 to 150 in 1630, and less than 80 in 1633. 69 The year 1646 witnessed the
operations of a bear syndicate against the WIC in the Lemaire mould. 70
Regular forward trading notwithstanding, there are no pamphlets, protests, contracts,
or any other documents documenting the use of stock options in the early decades of the
seventeenth century in Amsterdam. This is somewhat surprising, for in theory it is but a small
step from forwards and futures to options trading. Indeed, Amsterdam grain dealers had used
both forwards and options in the 1550s and 1560s. One might of course argue that no traces
are left because none of the deals went sour. However, it seems more likely that few options
were concluded for lack of short-term price fluctuations. The protocols of Amsterdam
notaries reveal the earliest forward transactions mostly had terms of one to three years,
suggesting that merchants carefully shifted positions with long-term strategies, rather than
trade in reaction to price changes. This strategy changed only in the 1630s when contracts for
delivery within six months became common practice. 71
A change in the dividend policy of the VOC, and the effect this had on share prices,
appear to have been the twin cause for the profound shift in trading practices. During the first
two decades of the company’s existence, shareholders only received dividends in 1610, 1612,
and 1620 (Figure 3). In the third decade VOC shareholders were paid dividends five times. It
was as late as 1635 that the company began to distribute dividends every year. Annual
payouts averaged 10%-20%, but varied of course from year to year with the company’s
performance, with lows of 15% and peaks of 65%, giving punters wide opportunities for
speculation.
The company’s dividend policy had a profound impact on the stock market. A
reconstruction of share prices during the years 1602-1675 from quotations found in the
Amsterdam notarial records shows that prices became much more volatile, with weekly,
sometimes even daily price fluctuations for the few months for which we have more than one
quote. 72 Moreover, the price rose sharply (Figure 3). VOC shares traded in a range of 120-
240% until the mid-1630s, when they began a steep ascent, touching 400 in 1638, 480 in
1643, and peaking at 540 in 1650. In the following years prices continued to move between
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