I don't understand this discussion. Why are you bothering the 10 call anyway? Is the stock short restricted? That ten call should for all intents and purposes be considred stock, IV does have a place in this discussion. Also, you shouldn't think of this as a bear call spread, it is buying the 20 put. It is, in essence by buying the 20 call and sell stock(the 10 call), a synthetic long put. You are attempting to do this for even money, or no risk. A very valid strategy by the way, I look for these myself. Hello has a couple of good points, why mess with the bid/ask spread on the 10 call? Second, it could very easily get exercised as MMs, last I heard, don't have short exemption on NYSE stocks and if already short the stock(and are ethical) are supposed to excercise the calls if they sell short on a downtick. The better idea would be to bid for the 20 calls on anticipation of a move higher than sell stock to make the deal a net credit. This takes some skill, but doable.
My trade would be to buy some 22.5s and sell the 20s at ratio of 20 to 7. Looking at the chart, i get the feeling it could break out of this one way or another, a backspread seems very appropriate although not sure about Sep. Maybe a ratio diagonal would be better, bid on the OCT 22c and sell the Sep 20 on a pop. The options don't look liquid enough to do this at attractive prices though.
If the stock is at 20 or around 20, Nitro can play the fun game of exercising his long call, or trying to buy the stock under 20. As an ex-MM, I miss the good ol' days of guessing which of your short ATM strikes will be assigned and trying to guess your position on Monday morning, lol !!!!
