Ann: Loyalty and Piggyback Options Program, page-444

Dude, you might need to check your model or you model's inputs. In the year's time we were speaking of in HIS scenarios, not mine, the options were expiring i.e. a year from now - we were ignoring the piggy back options values (too complicated to model without an essay) - per their 11 February 2026 expiry. If you think a $0.65 call imminently expiring on a $1.50 trading stock is worth "[$1.25, $1.32]", well I would sell you as many as you like there (jeez even a week out) on expiry, until you realised your error, or reliance on perhaps incorrect modelling parameters. With near no extrinsic (time) value left on expiry the very deep in money call option has a nigh on 100 delta and merely trades more like stock. Again, if investors need a model to tell them value of a very deep in the money call option right on expiry, perhaps they shouldn't be trading/investing in options. Their prerogative though.

If the stock is trading $1.50 on expiry, the $0.65 call value is almost entirely intrinsic. That is $1.50 - $0.65. i.e $0.85. NOT $1.25-$1.32 per your modelled assedrtion. If I buy a $0.65 call expiring imminently, which gives me the right to buy the stock at $0.65 cents, why would I pay $1.25-32 (for effective stock) for net $1.90-7, when I can just buy stock for $1.50? I would sell you options at $1.25-1.32 all day long on the 11th February (effectively selling stock at $1.90-1.97) and buy stock at $1.50 to hedge almost perfectly for a $0.40-47 cent gain. Ching, ching. Its called arbitrage and underlies the assumptions of the B&S model.

Anyone can throw figures into a B&S derived model, I was showing people how to intuitively value the options - you are falling into the trap of what decent option trader's called 'sheet monkeys'. You need to be able to intuitively understand options as well as just plug figures into a model or you might miss errors in the inputs/assumptions therein.