There is no room in the classical Black-Scholes framework for the market view of an investor. The investor in derivatives needs to know the volatility of the underlying, that is the 'choppiness' of the market, but the direction is irrelevant. Suppose we have two stocks A and B having the same...

In contrast to their role in theory options are in practice not only traded for hedging purposes. Many investors also use them for speculation purposes. For these investors the Black-Scholes price serves only as an orientaTion, their decisions to buy, hold or hedge an option are also based on...