The Absurdity of Cash Flow Numbers

The Black-Scholes formula has approached the status of wholly written in finance. It's often useful to push it to extremes, so let's postulate that we sell a $100 billion put option on the S&P 500 at a strike price of 9%. Using the implied volatility for long-dated contracts with appropriate interest and dividend assumptions, we would find the proper premium for this contract to be $2.5 million. The dollar will then be worth a small fraction of its present value - about 14 cents per share.