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I know options well, but I dont understand how spreads didnt react to this volume. Wouldnt the asks go higher and higher and higher with that volume? Also, what
by TuringNYC 3y ago
I know options well, but I dont understand how spreads didnt react to this volume. Wouldnt the asks go higher and higher and higher with that volume? Also, what insane market maker would offer this much volume and take the downside risk? It isnt even clear how they would offlay such a risk unless they just happened to be holding 550k*100 SPLK shares
- slig 3y agoThey hedge using the delta of the option and adjust accordingly.
- TuringNYC 3y agoSure, but the hedge would have raised prices across the vol surface? How did this go thru w/o raising the prices?
- mhuffman 3y ago>what insane market maker would offer this much volume and take the downside risk? At the time the downside risk was near zero, right? It was basically free money for them ... till it wasn't!
- yieldcrv 3y agothe market maker still collected $22,000 in premium if they bought shares after selling the options, thats motivation enough to fill the entire order at a good price before another market maker does. you can write unlimited options, so without scarcity the bid and asks don't have to change if the buyer can be a little patient. but if they only tried to keep up with the delta then they might not have bought enough shares and have some losses right now, on that one position they can take losses its a risk