Options were once stigmatized securities but posed a tractable normal-science pricing problem

Evidence

In the period in which much of option theory was developed, options were “specialized and relatively unimportant financial securities” (Merton 1973a, p. 141) and were stigmatized by being associated widely with gambling and with market manipulation. However, option pricing seemed a tantalizingly straightforward “normal science” problem, in the terminology of Kuhn (1970). With an established model (the log-normal model) of how stock prices fluctuate, it did not seem too difficult to work out how much an option on that stock should cost. — Donald MacKenzie, An Engine, Not a Camera, 140

Categorization

• XREF: The stigmatized-securities angle echoes the reader’s prior interest in moral panics over finance and in the history of financial innovation legitimation. — connects to: Efficient-markets and random-walk theory legitimized options against their scandalous reputation. — Donald MacKenzie & Yuval Millo, Constructing a Market, Performing Theory, 62; Pre-1970s options were stigmatized as speculation and market manipulation tools. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 523; The Black-Scholes model legitimized options trading by rebutting gambling stigma — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 703 (+6 more)

Broader Connections

• Pre-1970s options were stigmatized as speculation and market manipulation tools. #expands (0.90) — Donald MacKenzie, An Engine, Not a Camera, 523
• The Black-Scholes model legitimized options trading by rebutting gambling stigma #expands (0.85) — Donald MacKenzie, An Engine, Not a Camera, 703
• 1960s economists reframed stock options as rational and desirable despite Wall Street’s dismissal #corroborates (0.85) — Donald MacKenzie, An Engine, Not a Camera, 650
• The Black-Scholes theory reframed options trading as legitimate efficient pricing rather than gambling. #expands (0.85)
• Options pricing theory grew despite options being a minor financial instrument #corroborates (0.80) — Donald MacKenzie, An Engine, Not a Camera, 530