WSJ on options

WSJ.com – Thinking Things Over discusses options today:

To put it another way: The essential purpose of earnings reports is to help the market price stocks accurately, so incorporating the share price into earnings is circular and confusing. Earnings per share is a calculation with a numerator and a denominator. Options will already show up in the denominator as they’re converted into shares; they’re already included in “fully diluted” EPS. By what logic should they be factored into the numerator as well?

They also do us the favor of supplying the famous Black-Scholes Model that’s supposed to restore investor confidence in the market, to whit:

Now you feel better, don’t you?