[noname123]

Not a facetious but serious question, but what theoretical part of Black-Scholes is really important for a options trader's everyday trading?

I'm a programmer by trade but I trade options on the side. A long time ago, I read Hull's and Sinclair's derivation of BSM line by line. Nowadays, I totally forget all the math except the intuition as it relates to the greeks and base all my trading on those.

Talking as a non-professional, I found the math of BSM to be helpful for me to understand better the option greeks and the model's limitations (assumption of smoothness, doesn't take into account volatility simile's).

But not sure how the theory can really help me hedge better, come up with better implied volatility as compared to the current open source plug n' chug frameworks that computes Black-Scholes pricing (e.g., QuantLib).

Options trading is a hobby of mine and I'd love to hear a pro's take on these. Thanks!

[lordnacho]

The BSM will give you all the things that you know intuitively about options. Gamma is high ATM front month, Vega is higher with time, theta accelerates as you near expiry, and so on.

In everyday terms, BSM vols are also what's used to talk about what the price IS. So even if you're using a fancy model, to talk to someone else about it you pull out the BSM vol and tell him that way.

What will help you hedge better is finding a way for your surface to fit what actually happens when the market moves. It isn't an exact thing; many traders ask for a little more or a little less floating skew from their quant guy.