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To: Stock Farmer who wrote (119901)	6/5/2002 2:03:46 PM
From: rkral	Respond to of 152472

Black-Scholes option evaluation ... John, this disagreement, for guys our age and background, is comparable to two kindergarten kids determining the correct answer to 2+2. I don't wish to "agree to disagree", as the answer is too simple, and the answer is fact, not an opinion. Let me point out the Black-Scholes eq'n is based on setting the expected return .. for a covered-call (CC) writer .. who takes many CC positions .. over many years .. to a suitable risk-free return. This begins with calculating the expectation for a (at expiration) risk-reward profile for a CC, using a lognormal probability density function for prices. Perhaps you are having difficulty because you are thinking "expectation value", and not expected return. As I said before, you're a smart guy, too smart to believe ALL you wrote about the Black-Scholes eq'n. (Most of what you wrote IS TRUE.) If required, I will try to respond with additional "proof" .. assuming I can put one into words .. but first I would need to know .. are you just pulling my chain? <g> Ron