"Option" not necessarily illegal.

1 Biddle on Stock Brokers, 72. According to Mr. Dos Passos, an " option" is a contract by which A., in consideration of the payment of a certain sum to B., acquires the right or privilege of buying from or selling to B. specified securities at a fixed price within a certain time. (To this are cited Story v. Salomon, 71 N. Y. 420, and opinion of Van Hoesen, J., in court below, 6 Daly, 531; Yerkes v. Salomon, 11 Hun, 471.) " These options are of three kinds, viz., 'calls,' 'puts,' and 'straddles' or.

'spread eagles.' A ' call' gives A. the option of selling or buying from B. or not certain securities. A ' put' gives A. the option of selling or delivering to make it necessary for me to go to Liverpool next week, and I desire to obtain a particular room in a particular steamer, and I pay something for this right, or I pay something for the refusal, a month hence, of a yacht, or of a horse, or of a bale of cotton. Now there can be no question that when there is a fixed price, so that the contract is sufficiently definite, agreements of this class are binding.1 At the same time we must remember that it is not in this sense alone that the term "option" is used. Thus in the Revised Statutes of Illinois we have the following: -

B. or not, certain shares of said securities. A ' straddle' or ' spread eagle' is a combination of a ' put' and a ' call,' and secures the right to buy or sell to B. or not a certain number of shares of specified securities." Dos Passos on Stock Brokers (1882), 444.

2 See infra, sec 579 et seq.

"Whoever contracts to have or give to himself or another the option to sell or buy at a future time any grain or other commodity, stock of any railroad or other company, or gold, or forestalls the market by spreading false rumors to influence the prices of commodities therein, or corners the market, or attempts to do so, in relation to any of such commodities, shall be fined not less than $10, nor more than $1000, or confined in the county jail not exceeding one year, or both, and all contracts made in violation of this section shall be considered as gambling contracts, and shall be void."2

In a recent charge to the grand jury of Cook County, Illinois, by Judge Jameson,1 we have the following exposition of this statute: -

1 The argument in the text is applied as follows in Melsheimer's Stock Exchange (London, 1879), as adopted in Dos Passos on Stock Brokers, 445. " Let us suppose a person who is possessed of certain securities to be desirous of selling if he could get a bid, say one per cent, higher than the present price, and to be at the same time desirous of doubling his holding if he could buy at a price one per cent, lower. If he gives his instructions in this form to his broker, it may well happen that the price does not fluctuate sufficiently to make it possible to carry out either transaction. But the same practical result may be attained with certainty by the owner of the securities taking a one per cent, price for the put and call of them, for the money thus received would be, as it were, a reduction of one per cent, in the purchase price if the security is put upon him, and would equally, as it were, go to increase the selling price if it is called from him. There is, of course, this difference, that if the security is at precisely the same price on the option day as on the day the bargain was made, it may happen that the security is neither put nor called, and in that case the owner will have secured his one per cent, without further liability, and be in a position to repeat the process. Under such circumstances, the option could not be said to be void as a wager.".

2 Rev. Stat. 111., ch. 38, sec 180; see as to statutes of other states, supra, sec 453.

"By this section [that above given] are denounced three separate misdemeanors - the sale of options, forestalling the market, and cornering the market. All these have either, in name or in spirit, been always interdicted by the common law, and that of 'forestalling' was, at a very early day, made punishable in England by statutes. Over a century ago a movement arose in England for abolishing the restrictions upon the freedom of trade, and these statutes were, as a part of them, repealed; but the common law has remained, both there and in this country, unchanged, though fallen into disuse. The exigencies of the times induced our legislature a few years since to re-enact the statute against forestalling, and to add to it those touching options and corners, which I have read - offences in which the criminal ingenuity of our ancestors seems not to have been equal.

"The first offence is the illegal sale of options for future delivery of grain and other commodities. The fact that property is sold to be delivered at a future day does not make the contract illegal; or that it is not at the time possessed or owned by the seller; or that the time of its delivery is left, within fixed limits, optional with the buyer or seller; though in one sense any such sale is a sale of an option apparently within the statute. What makes it a gambling contract is the intent of the parties that there shall not be a delivery of the commodity sold, but a payment of differences by the party losing upon the rise or fall of the market. Of this intent the jury are to be the judges, and it may be inferred directly from the terms of the contract, or indirectly from the course of dealing of the parties.2

"By this legislation the general assembly had no purpose to interdict bona fide sales of commodities, but only such as are colorable or fraudulent, contrived by both parties as a cover merely for gambling transactions."

"The statute," said Craig, J.,3 "does not prohibit a party the purchaser may in the same way guard himself against loss beyond the consideration paid for the option, in case of his inability to take the goods."1 The mere fact, also, that wheat is to be delivered at a future day, does not infect the transaction with the element of gambling.2