Re: VHC Dec. Calls
Nice summary. What I meant was that the huge risk of taking a short gamma position is likely driving the spreads.
My point is that, with a binary event that will occur at any time, but may take a while to happen, and will send the price soaring one way or another very quickly, delta hedging a short option position is of limited use right now. If the market moves down on bad news, it will be very tough to adjust your delta hedge to cover quickly enough.
I would anticipate that this means low MM inventories, and low interest in short options positions, leading to very wide spreads.