Conceptually, I think I'm correct about options trading. I've seen your argument before [not with me] and we are both kind of correct.
Conceptually, options are bought because the buyer thinks s/he will be able to exercise them at a profit, on or before expiry. Alternatively s/he believes they will be able to sell them on market before expiry at a profit to someone else who has that belief.
Black & Scholes and others attempt to provide a mathematics based 'fair value' for options based on time to run to expiry, volatility etc. Black Scholes is widely used, which makes it self-fulfilling in many circumstances. When most market participants are using the method, then the options premium tends to get pushed up or down over time to the Black Scholes value.
In the case of very volatile penny stocks like BLK, I think it has only limited use. Firstly because few of the participants are using it and don't trade accordingly and secondly because it is hard to estimate some of the inputs.
Anyway, I know you are very busy so no need to reply and I'm only sitting here because another of mine is in suspension and is supposed to come out today. Must be off.
