[JumpCrisscross]

> options pricing formulas are not settled and the predominant formula was made by a firm that blew up using it

Options arbitrage between equity and options via BSM variants is settled science. As is put-call parity, an arbitrage between put and call pricing. The latter is a perfect arbitrage—it is riskless. The former is not, there is risidual risk that must be continuously managed. (That management is another transmission mechanism for information between the markets.) When mismanaged, it blows you up. But it still enforced a tight, arbitrabgeable relationship between equity prices and options.

What does blow people up is thinking options models are B.S. and then going and trading options. They’re likely the reason my options-trading hedge fund stakes have been doing so well.