Schwartz: Tale of Two Prints
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Making matters much worse for this position holder is the market width for these long-term options. Note the quote on 10/2 was about $0.06 wide from bid to offer, a 10% spread in terms of option value. The quote on the latest trade is very different, $0.10 to $0.55, wide enough to drive a truck through as market makers shy away from long-term options when it is unclear what the post-deal structure will look like. This type of risk has no Greek name, but clearly is somewhat catastrophic for the position-holder.
The second big print highlighted on 10/13 is holding up a bit better. The XLP was trading around $36 at the time and saw an enormous block of 249,900 January 38 calls trade near the $0.15 offer price. Shares are up $0.03 to $35.88 today, but down about $0.12 since that time. The market on the January 38 call is still $0.12 to $0.15, from $0.15 at the time. However, open interest is 256,831 and by far the largest position in XLP options. Three months are still remaining for the trade to play out.
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