great story greenman thanks for sharing

Nice move greenman! I didn't partake in all that. But I sure enjoyed watching it happen.

Greenman.

Great trade!  Great Story!  I've got a great story to share with you.  I might be off on a tiny detail or two but the essence of the story is markets can do ANYTHING.  And that has huge implications in the options markets.

Back in 1987 I was a phone clerk on the CME trading floor.  Our company had a phone bank at the S&P futures pit with 3 to 4 clerks manning the phones.  We also had a single phone over at the S&P options desk which I occasionally would work at.  On the Friday before the black Monday crash in October of '87 one of our larger customers called in and asked for a market in the December 300 calls.  We had roughly 2 months to go to expiration and the futures were trading in the 280s that Friday afternoon.   I waved down our broker in the pit and ask for a bid offer in the Dec 300 calls.  "2.80 bid 3.00 offer came the reply".  My customer told me he was short 10 of the 300 calls and submitted a 2.60 bid for 10.  The market was falling so he was anticipating covering for a profit as calls would decline with the falling futures.  The market continued to come his way and he called back 30-40 minutes later and asked what the market was.  I inquired and the reply was "2.60 bid, offered at 3.00."   It broke some more and he called again.  "Still 3.00 offer.  Your 2.60 for 10 is the bid!"  My guy yells into the phone:  "Cancel my bid!"  You're out I confirm.  "What's there now he asks?"  I ask and the reply is "2.50 bid, 3.00 offer."  The bid is dropping but the offer isn't coming down even though futures are dropping due to increasing implied Vol.  My customer yells "F**K it!  I'll let them expire worthless."  They expired worthless but that isn't the end of the story.

This is where the story becomes very memorable all these decades later.  Monday the stock market crashes.  I was working in on the futures phones that day.  We were bombed and were not allowed a lunch break.  One bathroom break each over the 6 hour trading day.  Futures hit a low of 181 on Tuesday (as I recall) then came snapping back to 260 during the week.  I was over at the options desk and hadn't heard back from our guy who was short the 300 Dec calls.  I looked into the pit and there was exactly one market maker in the pit.  Normally it was packed with 20-30 traders.  It was empty.  You may have already guessed why.  Out of curiosity I asked "What is the market in the Dec 300 calls?"  The lone trader, who I now assume had the backing of some large firm's money, says.... (can you guess the market for the 300 calls now that the futures were 25 points lower?).   "30.00 bid 70.00 offer."  I was incredulous not only at the explosion in the price but at the width of the bid/offer and said "WHAT?!!"  The market maker took umbrage at my tone and said, "You want to make a better market?  COME ON IN!  I'm short so much premium it's coming out my ears!  The water is warm."  

I don't know what happened to my customer who was short 10 at 3.00 but given the explosion in margin requirements that week he may have blown out even though he was correct on the direction and even though the market never got back to 300 by expiration.  All the market makers, who are usually short premium, blew out.  Implied Vol hit something like 400% as I recall.

I hadn't thought of that episode in years until you shared your trade Greenman.  

Good trades everyone and remember...  The markets can do anything!