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.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits.
At the time of publication, Henry Schwartz held no positions in the stocks or issues mentioned.

If you liked this article you might like

Irma and Harvey Busted Algos; Probably Done Deals Under Trump: Best of Cramer

North Korea Threats and Fed Actions: Here's How Markets Ended the Week.

S&P 500, Nasdaq Shake Off North Korea Threat to Bounce Higher at Week's End

Sprint T-Mobile Merger Will Have to Contend With This Wonky Number the DOJ Uses

North Korea's Nuclear Threat Pressures Wall Street at Trading Week's End