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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 75.19-0.1%Jan 16 3:59 PM EST
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To: RetiredNow who wrote (64034)5/14/2003 10:56:48 PM
From: Lizzie Tudor  Read Replies (2) of 77400
 
sure mindmeld, of course people would take black scholes, because black sholes overestimates, that is the entire issue with Black Scholes.

Put a hot company beta on an options estimation... a beta which is likely influenced by manipulation practices such as brokerages leveraging their inventory of a fairly new issue with shorts (a common occurence) and you've got an astronomical figure which is probably why there is no options trading on new issues. But options expensing has to work for new issues, so black scholes doesn't work.

Employees at Google offered black scholes estimate vs options would probably become millionaires right then on the black scholes computation. Kinda defeats the purpose of stock options though!
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