> If the near-the-money options are correctly modeled, how will you make money on them? In a hand-wavy sense, they're the hedge. A mis-priced option isn't co

> If the near-the-money options are correctly modeled, how will you make money on them? In a hand-wavy sense, they're the hedge. A mis-priced option isn't completely mis-priced: some of the modeling is correct enough. The trick to making money is to buy the mis-priced option, but then sell back the "part" of it that is correctly priced. That leaves you holding only the part where you think you have an edge, and in turns this is what makes the "insurance" model somewhat viable.