Does the Black-Scholes Model Work Well for Options on Bitcoin?

The Black-Scholes model is often used as a starting point for pricing Bitcoin options, but it does not work perfectly. Bitcoin's price movements often violate the model's key assumptions, such as constant volatility and log-normal distribution of returns.

Traders must use modified versions or more complex models, such as those that account for volatility smiles and jumps, to get a more accurate price.