Absolutely possible. But you can't trade the way they trade. In another thread, f you knew that GOOG could have moved 100 dollars then you shouldn't have sold that option in the first place (doesn't matter what the likelihood the model said).
Of course I would not trade that way if I knew GOOGL would move $100 in 1 1/2 months. Rethinking what you said, actually you were right, I should have known. If I tested the trade with different IV (or blueplayer said expected moves), even with just using BSM, I would see that a $100 move was entirely possible and should not have traded. Thanks.
I would argue that it would be a mistake for you to try and move beyond black-scholes at this point. Black-Scholes has a lot of flaws, yes, but over the years a lot of tricks and gimmicks have been developed to address a lot of various issues (skew, jumps, discrete hedging, etc.). From my own personal experience as someone who tried to move on too quickly to more complex stuff (stochastic vol, jump diffusion, etc.), I found out that I was far more effective as a trader when I returned to Black-Scholes and learned it inside and out. It's still a remarkably robust model that should not be discarded so quickly, in my opinion.
Longthewings, You are right come to think of it. What I need at this stage is not precision but a good understanding of the interrelations/interplays between various parameters, what they represent and how they relate to the underlying. It is very well suited to do what ifs and establish strategies. I am just in the process of understanding blueplayer's write-ups and I think I can just use Black Scholes to analyze his positions on returns vs time vs expected moves. Thank you for the advice.
Its not just fat tails ironchef; but more to the point that the financial time series as opposed to the data series that usually show up in physical sciences is non-stationary. So it simply cannot be modelled - to any degree of certainity. So the simple fact is all models are approximations which will all fail at different times. HTH! -gariki