The D K effect :Gamblers think they are trading . It is gambling lay games of chance for money; bet.take risky action in the hope of a desired result. 1a : to play a game for money or property : to bet on an uncertain outcome 2: to stake something on a contingency : take a chance
https://www.elitetrader.com/et/threads/dunning-kruger-traders.303402/ The Dunning-Kruger experiments behind the research focused on cognitive tasks (logic, grammar, and evaluating humor), but similar disparities exist in other areas. In self-assessment of IQ, below-average people overestimated their score and those above average underestimated.
Equity options are for the birds-equities are for idiots. The stockmarket rides a tide of lies and crashes on the truth. We can take advantage of the bloated opinions of the imbeciles who 'manage' money until they lose it all. And if option pricing is wrong so what? The stockmarket is overvalued by 200%, yet the dumb money still gets shovelled in every month. Yes they've been luck that us taxpayers gifted trillions in largesse to keep the game in play, but we'd like our money back sometime. QE is not a gift it's a loan.
Majority of banks use their in-house pricing models which only CAN come to Black-Scholes pricing in case of certain simplifications. If you want to have an edge in this better to try to develop your own approach which you understand better rather than blindly following it. I would say picking holes in their models is the best way to constantly have an edge over them
. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way. "Markets can remain illogical longer than you or I can remain solvent," according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe. The market is the sum total of the wisdom ... and the ignorance...of all of those who deal in it; and we dare not argue with the market's wisdom. If we learn nothing more than this we've learned much indeed. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.
Isn't this topic the underlying theme behind all of Taleb's work and his fund? Unlikely events occurring way more often then priced in to the options market?