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Old 09-05-2007, 02:24 PM
skindog skindog is offline
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Default Re: articles on covered call options

I agree with what you're saying, mostly. In fact, I almost totally agree. I'm just going out on a limb though and conjecturing... can anyone show me any data that options pricing as it exists in the market or the options pricing models aren't biased one way or the other?

Just for reference, what dictates option pricing? It's my understanding that a market maker sets prices according to an options pricing model like Black-Scholes and then that price is influenced by supply and demand. I could be way off though, I don't know the inner workings of the options markets.

So, what is to say that the black-scholes model, while applicable to the stock market as a whole, might not over or under-price options for a specific equity/industry? Or maybe the supply and demand that dictates which way option prices go is skewed one way or the other - either creating returns that are higher than justified or lower than justified - sorta like when the stock market has had periods of relatively low P/E's in the past. Relative option prices wouldn't be affected, but the overall premiums might be off.

Anyhow, just some random thoughts. I'm very new to all of this stuff and mainly spewing my own thoughts. Can anyone recommend any good options books that are in depth, yet practical for the day to day trading of options, or finding opportunities?
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