# BS model without volatility

Maybe it is a naive question, I simply can't understand how the industry is using the BS model to price options, as the option pricing formula requires implied volatility as an input, which itself is derived from the option market prices.

I just don't get how it all ties together given that one of the inputs is dependent on the output.

EDIT

Example: Assume it is Sunday, and public trading will open on Monday on a brand new equity share priced at \$s of a new company Amazing Inc. (no dividends, 0% interest rate) and I want to issue a new call option, with strike kon it, expiring in a year, how can I price it in dollars without having any volatility figures at hand??

• Here is one way to think about it: Assume i ask for the price of a call option on Amazon. You said 250 quid. This process can take few seconds at least. By the time i respond to the quote, the underling price might have moved by 10 quid. So is the call option price still valid? Maybe not. As options are really bets on vol, quoting price in vol make more sense, and you don't have to worry about the underlying price moving. – Magic is in the chain May 18 '20 at 18:11
• Thanks for your reply, it helps but prices are not quoted in volatility units, they are quoted in dollars. – user24980 May 18 '20 at 18:31
• separately assume it is Sunday, and public trading will open on Monday on a brand new equity share of a new company Amazing Inc. and I want to issue a new call option on it expiring in a year, how can I price it in dollars without having any volatility figures at hand?? – user24980 May 18 '20 at 18:35
• thanks, soz don't follow. Could you clarify: when you say the industry is using BS to price options, where do you find that they do so - presumably this is confidential? – Magic is in the chain May 18 '20 at 18:38
• afraid it is not - only for quotes in say OTC. – Magic is in the chain May 18 '20 at 18:45