Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it.

I'm your host David Stein. Today is episode 492.

It's titled The Power of Optionality.

Small Betts Big Payoffs.

On Money for the Rest of Us, we have discussed options

in the past, but usually financial options, such as call

options or put options on stocks.

But there's other types of options, and particularly options outside of the financial markets.

Options are something where you pay a premium, a small payment for the right but not the obligation to exercise that option.

With a financial option, typically there is an asymmetrical payoff.

The upside is much greater than the downside because the downside is limited to the premium paid.

One of the first examples of financial options is found in politics by Aristotle.

In that volume, Aristotle shares the story of Thelies of Mylides. Mylides was a philosopher

but he didn't have much money because he spent time on other things

and people would badger him

and not listen to some of his thoughts

because he wasn't very wealthy.

So Thalese decided he was going to make some money.

One winter he predicted that there was going to be a bountiful olive harvest that summer and there was Thales going to be a bountiful olive harvest that summer and Aristotle suggests it was Thales knowledge of astronomy that allowed him to make that prediction.

Thales went all around the area and put deposits down on the olive presses, and that secured

him the right to use all of those presses that summer.

He had an option.

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