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To: nihil who wrote (90407)	10/15/1999 3:52:00 PM
From: GVTucker	Read Replies (1) \| Respond to of 186894

nihil, RE: I understand that one of the problems in the pre-Black-Scholes era was finding some fair value for an option. How did you guys do it? Or did you just shoot craps? I never had the dubious pleasure of trading options prior to the Black-Scholes option pricing model. In the situations where a firm couldn't find someone to take both sides of the trade, my friends that did make markets basically tried to make sure that the spread was so large that the trade had to be highly unfair in favor of the house. When you had two neutral parties negotiating a transaction, most often both calls and puts were overpriced when compared to a Black-Scholes model. Early in the days of the CBOT, some smart traders slowly realized this, and selling naked calls and puts was a license to steal for few years, until Black-Scholes calculators became commonplace. The O'Connor brothers come to mind immediately; they were very active selling calls and puts through the bottom of the bear in the mid 70's, and made millions.