We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
I "get" Black-Scholes and why it "works". Theoretically, the market bakes in the best information regarding outlooks on the future through a variety of methods:
2. Interest Rates
All these items become part of the equation, in some format, which gives you a pretty good idea of what the future SHOULD entail.
This is because the market is made up of millions of random decision makers, and all that information sums up their decisions - and hence, their "view" of the future.
Why it can fail, however, is what makes markets even better than theories. I was once asked by a client why he should purchase my inventory management system - if it was SO GOOD, and EVERYONE used it, then he got no advantage - right?
WRONG. I told him a theory, or a system, is a TOOL. Hand me a Stradivarius, and I cannot make it play beautifully. Hand it to a concert violinist, and they can make it sound gorgeous.
The same is true of a computer system. The same is true of a theory. The same is true of Black-Scholes.
IF you have some idea, some belief, that something will happen in the future that is at odds with the overwhelming view of the market - then you have a presumed advantage over the market. And that is why you can make (or lose) money with your "knowledge".
It's also why you can beat (or get beaten by) the system.