On any given day, Black-Scholes model misprices option premiums on Wall Street due to assumptions of randomness, constant volatility, and no memory in stock movements. This lack of context leads to potentially suboptimal projections. For example, Palo Alto Networks (PANW) stock is expected to disperse between $171.31 and $204.01, entering the weekend on a pessimistic note.

NetEase (NTES) stock is expected to range between $127.52 and $148.43 based on implied volatility and days to expiration. Despite a downward slope in recent weeks, historical data shows that NTES tends to resolve upward. A bull call spread strategy like the 145/155 spread expiring Feb. 20 may offer a max payout of 212.5%.

Dick’s Sporting Goods (DKS) stock is anticipated to disperse from $198.07 to $232.57 by the Feb. 20 options chain. Despite negative implications from a 3-7-D sequence, DKS historically tends to resolve higher. A bull call spread like the 220/230 spread expiring Feb. 20 could yield a max payout of 150%.

Read more at Barchart: Using the Markov Property to Find Mispriced Opportunities (PANW, NTES, DKS)