CBOE

joedoebshah

What's CBOE

jkb5444

It’s fake. Multiple people have audited the CBOE tape for record of this 100k buyin, nothing could be found.

MediocreTapioca69

another guy pointed out this trade is not on the CBOE tape so likely all fake anyway

MachThreve

Starting to think this is fake. It’s not on the tape at CBOE

tg4l

It’s not Schwab’s decision. It’s the exchange’s. See the CBOE rulebook

Ken385

You are right lots of volume yesterday on these puts. Most single leg. The one big order of 17,505 was marked SLFT on the CBOE. Which means Single Leg Floor trade. The OCC put a memo out today saying that all options will settle for cash and expiration dates will be accelerated to June 20th (for options expiring after this date.) The cash settlement price is 24.50 (24.25 + .25 special dividend) So 25 strike puts are worth .50. OCC Memo link, [https://infomemo.theocc.com/infomemos?number=56587](https://infomemo.theocc.com/infomemos?number=56587) Nordstrom press release today, [https://press.nordstrom.com/news-releases/news-release-details/nordstrom-announces-completion-acquisition-nordstrom-family-and](https://press.nordstrom.com/news-releases/news-release-details/nordstrom-announces-completion-acquisition-nordstrom-family-and) Not sure why there was so much volume here.

Tasty-Window

**is there anyway, that I can see in real-time when the SOQ turns into the actual VIX?** I guess this happens on Wednesday mornings usually. I'm just curious if there's a way on the CBOE website. [https://www.macroption.com/vix-soq/](https://www.macroption.com/vix-soq/) >The exercise-settlement value for VIX/VIXW options (Ticker: VRO) shall be a Special Opening Quotation (SOQ) of VIX calculated from the sequence of opening prices for regular trading hours for the SPX options used to calculate the index on the settlement date. The opening price for any series in which there is no trade shall be the average of that option's bid price and ask price as determined at the opening of trading. [Click here for Settlement Information for VIX/VIXW options](https://www.cboe.com/index_settlement_values/). **Or is it the VRO symbol?** [https://finance.yahoo.com/quote/%5EVRO/](https://finance.yahoo.com/quote/%5EVRO/)

ResearchPurple1478

I use Trade Alert from CBOE. It’s pretty great. In addition to the highly customizable alerts, you can get trade recaps on any underlying or basket of symbols and leverage 50 API calls per day to run your own custom app. It uses CBOE volatility and pricing data so it’s very accurate compared to something like Barchart or thinkorswim. I was using Barchart for a while but I noticed that a lot of their volatility data was very different than other services and different than thinkorswim which uses composite IV. I personally prefer IV30, 60, 90 over composite IV. I’ve heard that a lot of services use trade alert as their back end and I know that fidelity uses their other product, LiveVol. Trade alert doesn’t have a lot of bells and whistles though. It’s a pretty basic interface but that’s what I like about it. Their other service called liveVol is more of a dashboard type thing. I’m surprised more people here don’t use either of these services.

IllUpvoteEverything

CBOE should just stop selling puts

ResearchPurple1478

I like your z-score approach. I assume you have some sort of spreadsheet or custom app you use to perform those calculations? Where do you get your data from? I ask because I find getting quality data from a professional source really makes a big difference. I use thinkorswim for trading but I think that some of their volatility data is a bit off so for that I buy data direct from CBOE and parse it with a custom app I built.

PapaCharlie9

CBOE folks want to go home on time? FWIW, SPX and SPXW do trade up to 4:15, but not on expiration day. Probably to allow some time to calculate the SET for PM settled contracts, but I'm just guessing, I don't actually know.

papakong88

There are many ETFs doing that with puts. For example, SPUT. There are many ETFs doing that with calls. Google covered call etfs for a list. Therefore, there are benchmarks from different organizations. For example from CBOE. [https://www.innovatoretfs.com/etf/default.aspx?ticker=sput](https://www.innovatoretfs.com/etf/default.aspx?ticker=sput) I have been doing that successfully with NDX naked strangles for over 10 years.

Bullishbear99

No it really is correct in this instance. Even on the CBOE they state most people who trade options lose money, the vast majority. It isn't a made up statistic.

rriggsco

Without knowing the details of the aggregate CBOE P/C ratio, it's hard to ascribe any meaning to the value. The SPY P/C ratio gives us a clear market sentiment indicator.

esInvests

I would start with the very basic option structures and understanding how they perform. This can be done on investopedia, CBOE, etc. Then I’d grab a copy of options as a strategic investment and work through that.

Ken385

Just to point out, you are probably not going to be able to get Depth of Market on options. You can get top of the market for each of the 18 or so options exchanges, which may look like DoM but really isn't. True Depth of Market (seeing bids/offers below and above the current bid/offer on the same exchange) is possible but very expensive. For example the CBOE offers this (along with a few other things) through their CBOE One feed for around $10,000 a month. [Cboe Market Data Services](https://www.cboe.com/market_data_services/us/options/) I have not seen true Depth of Book offered elsewhere,

DC9B717Captain

What is your experience level? Have you ever traded options? Read any books or literature on options? (Start on Amazon or Google books, local library, etc.) Researched the web for general options information? Research should include Exchanges (e.g. CME, CBOE, etc.), Brokers (e.g. IBKR, tastytrade, Schwab) general financial websites (e.g. Investopedia, Barchart, etc.), Writers (e,g, Sosnick, Sears, Wu), etc. Look at Rule 8 here on this subreddit. While it is possible to trade 0DTE (zero days to expiation) successfully it requires some in-depth understanding the options markets in general. The only thing different with 0DTE options is that you are trading on the day the options expires but has been in existence for week or months in advance. That said, I do trade 0DTE SPXW options and make money at it but I didn't just start down that path at the git go. I've been trading options (mostly credit spreads) for years and moved to the SPXW weeklys a couple of years ago. SPXW options are different than SPX options (and SPX AM options). You need to know those kinds of differences. Ditto equity vs futures options. And a bunch more. Best

Ken385

Great. Also, if you are trading at a broker that allows you to direct your order (such as TOS/Schwab) try routing to the CBOE. Their taking liquidity fees are less/zero (depending on the other side) so I find you are more likely to be filled vs your order being sent to an exchange that charges higher taking liquidity fees. The other side needs less edge if they are paying less in liquidity fees.

SuspiciousStress1

Thanks for the great pearls of wisdom, much appreciated!! I did ok in 2008, not great, but I didn't loose it all(thankfully), however I was only in stocks back then....not sure why, my cousin works for CBOE, so it shouldn't have been such a foreign concept-lol. Truly, I only did it when we wiped out our port/retirement due to some bad luck(health/kids needs-I was diagnosed with MS, dropped dead in a docs office, oldest needed 3 knee surgeries, husband lost 3mos of work in govt shutdowns(during this time)& autistic daughter needed an uncovered by insurance meltdown therapist that cost us ~$65k), wanted to rebuild faster without giving up things like Christmas or vacations forever(a few years was ok-lol)& this was my way 🤷‍♀️ I'm not a crazy risk taker like some, I don't reinvest my options profits in more options(sometimes I think about it, then just look at the loss porn-lol), just take the gains & put it into the market. Right now things are crazy, holding over night feels like major risk taking 🤣 however you cannot wallow in losses, in any part of life, it's just not productive! Good luck to you too!!

ConsiderationTop3634

Check order book right before close 1.4m shares bought youse CBOE exchange book viewer. This might see 350 tomorrow.

hgreenblatt

I would not let Tom anywhere near my computer or TV, he is a disaster , however he and his partner Scott are the founders of Tos, sold to TDA, and now Schwab. Both seem to be pretty good traders and I guess started in the 1980's on the floor of CBOE as option traders. They started Tastytrade 10 -15 years ago , which they still operate but it too was sold . You should review their site Tastylive, since it broadcasts all week long, and most stuff is archived for later viewing. They have tons of 15 min. shows on studies they have on trading options. Be-aware they sell naked options , and have no issue letting their customers do the same. The platforms are geared to option trading rather than Buy and Hold.

angrydewd

Go to CBOE, take the course on futures. Next go to PH and search futa bus. Now, you have become: me

phungus420

CBOE .VIX options are European style options. Maybe that's what's going on here? You'd have to call your broker to find out. European style options differ from American in that European options can NOT be exercised early - at expiration the contract is either exercised if ITM or expires worthless if OTM; also the time and resulting date is pushed a few hours ahead since European options expiration usually refers to London time zone or the DAX time zone; again it would depend on the contract.

OkGrab7318

Unfortunately I have not seen a single poster that even knows the full wheel strategy as invented by the floor traders at the CBOE many years ago. That full wheel strategy has turned many small accounts into very large ones over just a few years time using the trade to harvest profit with it's automatic cost averaging feature. The original wheel trade has 3 components, not two.The central part of the strategy where BOTH Puts and Calls are sold simultaneously is the key. If you are intelligent, and run the wheel correctly you will make profit. If you listen to the clueless "experts" your returns will be mediocre at best. Sell puts on 1/2 desired position, sell calls when assigned plus sell puts on other half the desired position, when assigned stock then sell calls on full position until assigned and lose stock. Rinse & repeat. A few details such as proper strike selection and you're off to the races.

Hot-Following-7707

According to Schwab of didn’t do anything wrong. CBOE is saying that pricing was incorrect. But if that’s the case, why don’t they have technology to prevent tye fill?

Hot-Following-7707

That is correct. Even though the CBOE allowed the fill, they busted it later. If it was a bad fill, why didn’t CBOE prevent it from occurring in the first place?

MidwayTrades

Theoretically, sure. But these concepts are just mathematical tools to help you quantify risks. At the end of the day, prices are set by buyers and sellers. A mentor of mine used to work on the CBOE floor as a MM. He asked me to tell him what IV was. I stumbled around for a bit and he told me that IV is whatever value is needed to make the mathematical model match the real price. And he’s right about that. Personally I think the pricing is not particularly stable because you are so far out in time and that messes with the traditional models. It’s possible that you overpaid when you entered which is easy to do given wide bid/ask spreads and you’re seeing the effect of that now. The good news is that you have, for the options world, an eternity on this trade. That means the daily fluctuations aren’t as meaningful as they would be on a shorter term trade. Personally, I don’t have much use for LEAPS. If my timeframe is that far out, I’d rather just own shares, dollar cost average into it and, in this case, collect a small dividend. The only time I’ve ever dabbled in LEAPS was to do a PMCC where I buy a deep ITM LEAP and sell a shorter term OTM call against it, essentially emulating a covered call without shares. But a vertical spread a year and a half away? Not for me. If it works for you, that’s fine. But if there was serious money to be made on LEAPS, the big funds would be all over them. But we know they aren’t because the volume and OI don’t show that. But that’s just my opinion. I know there are several folks on here who like them and more power to them.

konga_gaming

Pope Leo’s childhood home was literally two blocks from CBOE options exchange.

Gravyszn

Genuine question: How do XSP and other indexes value options after hours? Do they go off of futures or what? I have a $573 XSP call for Friday that is way up pre market, I know CBOE is supposed to be 24/5, but just didn't know since there is no underlying chart for after hours. 

Tasty-Window

So CBOE isn’t privy to any special data?

I_Own_A_Fedora_AMA

I’d write a python script to find all call contracts traded on the CBOE with over 10,000 contracts of open interest and $200,000 in daily traded volume. This is important, because I only have $10,000 in capital to deploy on a days notice. The script then queries an existing public database to find the alpha of each underlying stock for each contract. I multiply the alpha by 2.00% to find the implied move for each individual ticker, use black shoals to find the implied contract price move for that specific call, and have the script print me a list of each contract that qualifies ordered by estimated return. I would yeet $10,000 into the one with the most return.

HecaResearch

You're right, they the CBOE added global trading hours to the instrument.

Relative-Credit4506

I've lived in chicago for ~20 years, but i still have never heard of CBOE

Tobocaj

Yea this shitty graphic just screams CBOE 

ZerglingKingPrime

"When you press send on an SPX order it gets sent to your broker who routes it to a floor broker typically either XFA or Lakeshore" This is not true. Someone who worked at CBOE should probably know that brokers don't send that flow directly to Par stations

ZerglingKingPrime

Agree there. The flow is less valuable and it is more difficult to internalize (but not impossible). Large sized SPX orders that trade on the floor is a completely different story though. What I’m saying is that those brokers still route SPX flow to MMs and are still being compensated for doing so, the agreements vary by broker, and then again by mm. What’s more valuable to a market maker, a pre split MSTR contract or a front week AAPL contract? The rate is the same for both. It’s just not so black and white. Who do you think is “crossing” all of the SPX flow in the CBOE pit?

Ken385

I think u/voltrader85 is right here. SPX orders just aren't as valuable to MM's. where they pay for the order flow. Since it is single listed, all orders will be traded at the CBOE. The MM firms wont have the option to cross the order the on one of the 18 exchanges as they might with equity options. Talking to a friend at TD (now Schwab) a while ago about reduced commissions. He mentioned they are much less willing to lower commissions for customers who mainly trade SPX as they aren't getting the same PFOF as they would in equity options.

voltrader85

If schwab was receiving any PFOF on SPX, it would be reflected in their 606. Since their disclosure clearly excludes SPX, this confirms that schwab does not receive any PFOF on their customer’s SPX orders. It stands to reason that no other brokers do either. What sort of work do you do that makes you an expert in this? I am by no means an expert on exchange rules, but I do trade for a MM that has exchange membership with CBOE and makes markets in SPX, so I feel I do have a fairly high, if perhaps incomplete, understanding of how the product works.

ZerglingKingPrime

"Do you think schwab would be choosing to pass on PFOF revenue on single-listed options if they could be receiving it? I doubt it." I don't understand what you are trying to say here. They are not receiving anything from the customer, they are still charging 0.65 and adding the CBOE fee on top of that. The parent comment is about fidelity not charging the fee. Who do you think pays that fee? Obviously the market maker. In this case zero-fee is still PFOF but because of the accounting they don't need to disclose it There are several ETF options that are singly-listed, they're usually extremely illiquid but TSPY is an example only listed on NYSE

papakong88

The CBOE fee is about $1 for SPX. Schwab subsidizes 0.45 and charge 0.55. Fidelity do not charge the fee. NDX has no fee.

possible-penguin

My understanding is that the CBOE commission is not negotiable, but broker commissions are. I am currently paying $1.12/ SPX trade on ToS, having negotiated Schwab's fee to .50. It's still a lot. I typically open 15 spreads at a time, and between open and close I'm paying almost $65 in fees.

HecaResearch

there isn't afterhour options, the clearing houses and CBOE have strict schedules. Unless you're doing OTC stuff.

Ken385

Your cheapest rate for SPX options would most likely be Fidelity. They are only broker that I know of that doesn't add the CBOE exchange fees of about .65 per contract. You will only be paying their commission rate. In terms of fills, all the brokers should be similar for SPX options as they are single listed, only trading at the CBOE.

Longshortequities

Nope. Emailed CBOE - SPX, SPXW, VIX, and other index options exclusive to CBOE do not participate in PFOF.

moonkiska

Ah, okay. I was going to message TOS but re-read the thread and misread this part: "All SPX orders are sent directly to the CBOE, where the as-mentioned market makers provide liquidity within the exchange." I did not know if SPX was eligible for PFOF or not. Thanks!

Longshortequities

Emailed CBOE's research team. CBOE's response: "Hi XXXXX, thanks for the email! You are correct- prop products (SPX, XSP, VIX and a few others including MBTX and the new SPEQX) are excluded from the pfof program!"

CressOverall7400

Here it is mouth breather: The CBOE Volatility Index, or VIX, is a real-time market index representing the market's expectations for volatility over the coming 30 days.

Duncan810

It should show if you turn on display of extended hours. CBOE updates the estimated settlement until 3:15 CT.

etzel1200

No one needs this. Just fucking add options and futures on CBOE roulette wheel outcomes at this point.

5349

CBOE web site says "Trading in SPXW options will ordinarily cease on the day of expiration, 3:00 pm CT." So as far as displayed option prices go, that would I guess freeze at 4pm. Regarding the index settlement price, "The exercise-settlement value is calculated using the closing sales price in the primary market of each component security on the expiration date." Hmm.. I know that SPY trades until 4:15pm, do all S&P 500 constituents have 4:15pm closing prices???

DoubleSkew

Not talking overbid specifically on the long vol side - Rather retail (especially on this subreddit) seems insensitive to wide bid-ask spreads… I’m not interested in taking the directional risk. I just don’t see put/call volumes dropping anytime soon (as a general trend this decade) - so wanna be positioned alongside the entities that profit from the rise in exchange volume. Think how CBOE doesn’t care which side the market goes to- they make money regardless from every VIX or SPX contract by charging a fee

Gom_KBull

Sounds intense, i need you to do some things before I buy in: 1. Do an IPO 2. Have a fund set up a 5x leveraged etf on your stonk (Ticker: COCK) 3. Have CBOE set up an options market on the 5x COCK etf

Deep_Crypto_Value

Thank you for sharing and help us retail trader understand CBOE unfair bust (in my opinion). May i clarify, do you mean that CBOE think the take profit at 50% was unjustified due to the option was misprice from the catalysis, so they decided to revoked the original fast fill? due to the option was mispriced from drying up liquidity?

Lovecodeabc

“In the week ahead, investors should be careful for a spike in CBOE P/C, indicating a lack of investor confidence.”

muay_throwaway

The CBOE put/call ratio is at 0.81, so if anything the market is overoptimistic and likely expecting tariffs to be cancelled.

Longshortequities

Wrong. CBOE has market-makers (ie your list). But we are talking about SPX and SPXW index options. SPX and SPXW options are single-listed. Trade only on the CBOE. Thus, brokers cannot route orders to competing off-exchange market makers or wholesalers in exchange for PFOF as is common with equity options. All SPX orders are sent directly to the CBOE, where the as-mentioned market makers provide liquidity within the exchange. While PFOF is significant in equity options, where exchanges or market makers pay brokers to attract order flow, this model does not apply to SPX options due to their exclusive listing.

ebfeebfe

I defaulted the CBOE for my beautiful $BA 180 calls expiring yesterday.

taffy_laffy

the definition of a leap has been updated by the CBOE >A LEAP is an option with more than 24 hour expiration, these option contracts carry significant risk.

Arcite1

You can buy long options with >9 months to expiration on the CBOE on margin. See the section "Margin Requirements for Certain Options Positions:" [https://www.cboe.com/us/options/strategy\_based\_margin/](https://www.cboe.com/us/options/strategy_based_margin/)

Bucktown312

This is the options clearing corp. They clear all the equity options as a clearinghouse for CBOE and the like.

SeveredOrphan

lol I didn’t know $CBOE was real until today. Are these guys the house?

xXSomethingStupidXx

Without enough volume/liquidity, bid ask spreads open up, and wider bid ask spreads generally signify a perspective on risk/reward from the market makers (like CBOE). Stocks can also have wide bid ask spreads for the same reason, but it is far less common for the simple reason of buying volume. No demand + high supply + perceived risk/reward from market makers determines the spread on low liquidity contracts. Theres pricing models for it and everything.

Master_Tourist1904

You aren’t supposed to hold through earnings? Then how do you YOLO your money? I love how my $TSLA calls I bought last week are worthless now. But it’s ok. After earnings I expect a huge pop in the share price. They are just shaking the tree today & tomorrow to get the paper hands to fold! Fuck your CBOE!

RockhopperZP

Yeah it's wild this could happen. Re: bust timing: I'm pretty sure the time window to bust varies by exchange. From this story the delay by the brokerage was the huge factor. The bust at the exchange happened soon after the trade. Busts that can result in a customer losing their fills have to be mutually agreed upon, so the fact that this is even an issue is crazy (Schwab must have agreed to the bust for him) Re: how to avoid: Full disclosure I work for a firm that does not have a retail trading operation. I haven't traded options in my personal account in years due to my firm's rules. When I was trading I never went through this myself. Only advice I would give is use a legit brokerage. You get what you pay for. A dollar commission per trade is more than worth it vs the ones that offer 0 commission trading. The 0 commission ones usually are making up for it with PFOF arrangements, so the liquidity you get can be worse & you'll pay more on the spread anyways. So you can be paying way more than $1/trade via paying more or selling less per trade, just that opportunity cost is not transparent. Personally I used & still use interactive brokers. Though I can't say for sure that this wouldn't happen with them, I just haven't gone through it or done research. That said I expect they'd be one of if not the best retail-available broker for handling this. Especially with SPX: IB has their own station on the SPX trading floor for executing their customers' orders directly on CBOE. They have no PFOF arrangements.

Lovecodeabc

I just picked instances where CBOE P/C ratios spiked alongside a SPX decline. I'm willing to test other dates, but i didn't get enough time -- if you have some interesting dates, please reply.

ugeb318

What gave CBOE the right to do this in the first place?

Small-Ad-272

For people who don't understand. When selling a spread especially a credit spread. There are 2 calls combine into a single strategy.  Short - (sold) receives credit Long - (buy) paid a debit has the actual value. Vertical credit spreads:   short - long = credit. With credit spreads the long has values but is capped by the short call. But in this case, since it's technically a bear call spread. Your short is below the long. And one must cover the width of the short to your long with a margin debit deposit. That is how his max lost was like 3-4k - credit received.  Recall SPX is cash settle but it works just like regular stocks within options.  CBOE left him hanging on his long calls essentially leaving him naked, they pretty much nullified his long calls. Although he sold them and did whatever end of market. 

Brother-of-Jared

I lost $8k when 4 of my SPX sell-to-close orders were busted by CBOE after the contracts expired OTM and the MM contested. The money simply disappeared from my Fidelity account, and I had to escalate the issue for a month before Fidelity acknowledged to me that there was a rare computer error impacted my trades on all four occasions that day.

ashlee837

the speculation is that the counterparty/"market maker" didn't like the price at which some legs got filled, so they called their buddy at the exchange to undo the trade. This manual "it's just a prank bro" process is not automatically communicated to the retail trader. So the time delay left the trader exposed to more risk than what he saw on his Schwab platform. TLDR; Dale might have legal recourse against Schwab. CBOE is indemnified a million times over because this isn't their first rodeo.

Psychic_Trader

I think you'll win. Does anyone know what the official float for $BULL is? I've read that the CBOE only lists options on stock that has a float of 7,500,000 million shares or more. Please help! Thanks.

redditorium

>Schwab is actually right in this case. The bust was executed by CBOE and Schwab has to abide by that. Indeed the trade would not stand as a result of the bust. However, schwab can say our process was broken in this instance and here is compensation. That last part is totally up to schwab. > By the time they were notified of the bust it would have been too late to get a hold of him It is not clear to me what the exact timeline of events is after the bust in terms of notification to the schwab customer. That timeline is crucial. ------ Separately I do find it funny that of my comments about this issue the one that is actually attempting to go into detail on the rules and exact process has neither upvotes nor responses as of this moment.

BurgerKingInYellow1

Schwab is actually right in this case. The bust was executed by CBOE and Schwab has to abide by that. By the time they were notified of the bust it would have been too late to get a hold of him, and even then he would have been screwed because he would have to close at the current ask which would have been close to the intrinsic.

reichjef

I tend not to believe that CBOE did this directly. I have a feeling his broker left him on the hook and fed him false information. They probably dark pooled it, started taking heat, and just offloaded it on the customer. Have you ever tried to kill a trade on the SPX, VIX, or NDX and noticed it takes like 10 seconds when anything else would have been absolutely immediate? I always think that’s the broker looking for fill it in those seconds off their pool, before they actually kill the trade.

Riptide34

I didn't read the entire CBOE rulebook on this (or at least didn't see this clearly specified), but does anyone know whether they can bust individual legs of a spread transaction (i.e. if this was opened and closed as a call spread instead of legging out)? I would think that executing all transactions as a call spread (and not legging out) might help prevent a scenario like this, but frankly I don't know. Would be interested to know if anyone has insight on that.

RockhopperZP

True, though if it was a forced bust like a catastrophic error, the customer should have been price adjusted, not actually busted: [https://cdn.cboe.com/resources/release\_notes/2022/New-Cboe-Options-Obvious-Error-Procedures-Effective-July-1-2022.pdf](https://cdn.cboe.com/resources/release_notes/2022/New-Cboe-Options-Obvious-Error-Procedures-Effective-July-1-2022.pdf) So I think Dale's case must have been a mutually agreed bust. Which IMO makes this even worse by Schwab: that they not only were slow to notify, but were slow after agreeing in the first place. I don't know why auto-accepting busts would be their policy. Someone else commented & linked this thread, which shows the same exact behavior with Schwab, but will fills on PHLX not CBOE: [https://www.reddit.com/r/options/comments/1jxf4yp/option\_sell\_to\_close\_cancelled\_after\_settlement/?share\_id=hbKb-KOw3nAOfq12UPwxA&utm\_content=2&utm\_medium=android\_app&utm\_name=androidcss&utm\_source=share&utm\_term=1](https://www.reddit.com/r/options/comments/1jxf4yp/option_sell_to_close_cancelled_after_settlement/?share_id=hbKb-KOw3nAOfq12UPwxA&utm_content=2&utm_medium=android_app&utm_name=androidcss&utm_source=share&utm_term=1) Again Schwab accepted a bust and didn't notify the trader until the next day.

RockhopperZP

I read your last post, and yeah this sounds like the same situation, with Schwab being the most 'in the wrong'. They should have notified you sooner that they accepted the bust request. I'm not as familiar with the bust rules at PHLX as I am CBOE, but have to imagine it's the same where it's a mutually agreed bust (Schwab agreed on your behalf without telling you in a timely manner). Here's some color on how customer orders are treated in catastrophic trade scenarios (only non-mutual bust case): [https://cdn.cboe.com/resources/release\_notes/2022/New-Cboe-Options-Obvious-Error-Procedures-Effective-July-1-2022.pdf](https://cdn.cboe.com/resources/release_notes/2022/New-Cboe-Options-Obvious-Error-Procedures-Effective-July-1-2022.pdf) \^So for case, same with the trader in this thread (Dale), the broker must have agreed to the bust. If the exchange forced them to take it (catastrophic trade), your fills would be price adjusted not busted. Them being busted tells me that it was a mutual bust, so Schwab must have agreed on your behalf. So all evidence (to me) points to Schwab being the problem here. Not immediately notifying traders after agreeing to a bust is just wild. Their platform not reflecting the updated position is poor form. Most option settlement doesn't happen til end-of-day, so what might be happening is they lack automatic infrastructure to notify/update re: busts intraday, settlement happens end-of-day, they miss the fills that were busted, and then they notify traders. This is just speculation though. For what it's worth my firm receives very few bust requests (they're not super common), but when we do it is not automated. A person from the exchange reaches out to us. So lack-of-automation from Schwab would not surprise me. The busting process just isn't super clean. One thing I can speak to, which unfortunately isn't great news.: Agreements between brokers and customers in the market are very bespoke. Brokers can write in almost anything they want, and indemnity clauses are a huge part of these. I would be very surprised if Schwab didn't clear themselves of indemnity in the terms & conditions that were probably signed around account opening / options trading approval. Exchanges / the SEC have rules to protect customers, but can't police the broker : customer relationship. Unfortunately I'm not optimistic that there's a good recourse OFC I haven't actually read Schwab's T&Cs, but would bet >95% that they have very favorable indemnity clauses to absolve themselves of liability here. If you want to look into it further, I think the Schwab fine print is where you'll get answers. Check everything you signed around both account opening and options trading approval.

ryanzw

It wasn’t the last 30 minutes it was much earlier. The brokerage didn’t reverse it, the Exchange CBOE did for reasons I do not understand. It’s the brokerages job to inform me in a timely manner which they absolutely did not do.

RockhopperZP

Yeah learning about this issue retail side of it has been eye-opening, it's just (for lack of a better term) wrong that business can be conducted this way. In an ideal world the trader gets to choose to bust or not to bust directly with CBOE, but I get how this couldn't be practical with the whole system around execution brokers. It should be part of the broker's fiduciary duty to do right by their client. The rules around mutual busts don't work as intended when one side isn't acting rationally (Schwab blindly accepting a bust request). Honestly I'd ascribe this to more incompetence by Schwab rather than a conspiracy involving market makers etc. The companies I've worked at were all very compliance-focused, and our trading partners in the market seem to be as well. We have a 'long term' view that a short term PnL gain/loss is never worth the long term damage of a compliance issue. However ofc I can only speak for those few firms, & I've never worked for a company with a direct retail trading (PFOF) business. TBC I don't have reason to think PFOF firms are not compliant. My issue with PFOF for retail is that it's generally worse execution (though this isn't a big secret). Hopefully promulgating this event helps encourage some change & makes handling these events in the clients' best interests a larger priority for brokers.

CloudSlydr

man, i watched your video just last night. heart-wrenching to say the least. i was trading XSP & SPX credit spreads a lot between 2 and 3 years ago. switched once we got to chronic vix<20 territory as i didn't like the amount of risk vs. reward selling spreads and moved to relative strength strategies. in the discord i trade with, some people (including me) have recently been highlighting the amount of credit that can be obtained near these market resistance levels on SPX (near the liberation day gap). there have been days you can take 1:1 or 1:2 risk selling from nearly 30delta if you were exiting on a break of the gap. we all of course hesitated for the most part due to the potential of a news candle creating absolute havoc and having to even think about risk management doing their thing with short legs, covered or not. i sincerely hope that Schwab can help broker some sort of solution w/CBOE in your case. even one that is partial would help. heck even 2-3x max loss on the spreads being honored would help.

Hot-Following-7707

I sold a call spread for a credit of 2.20. I put on s profit taking target for 50% of max credit. This trade was a resting order for buy to close at 1.10. 4/10 contracts filled. I closed the other 6 shorts at a loss. Then I closed the long wings that were 35 points away. CBOE busted the buy to close trade for the 4 contracts leaving me exposed to unlimited risks.

moonkiska

I wish Dale would find out the timeline behind the scenes. It looks like the bust occurred at 2:36pm CT. He didn't notice the voicemail until 8:24am, only after chat support told him about it. This interview is from the day after he was assigned, before the conspiracy angle spun up: [https://www.youtube.com/watch?v=U4xo1tt3gpA](https://www.youtube.com/watch?v=U4xo1tt3gpA) I am interested in if there was a market maker between them that may have been informed but didn't pass it along to Schwab? I've been trying to keep track of market maker activity in 0dte world as their participation has increased in the last two years...Wolverine and Dash seem to be frequent offenders of shady stuff. If there is any kind of change that could be derived from this is more transparency on timeline of events and some kind of obligation on the other parties after CBOE's involvement to notify.

RockhopperZP

Re: the brokers obligation, Honestly, I can't confirm. I've never worked at a retail brokerage or dealt with this in personal trading. I think I saw someone else also say there's no obligation. Speculating, I'd say at the very least any potential obligation is nullified in the terms&agreement. My main initial point was that it's not on CBOE. What you described above is absolutely true. It's bullshit from Schwab. It's pretty shocking to me that Scwab could/would do this, but sounds like it's something retail traders deal with. In my opinion they should have an obligation to inform their customers if a bust occurred. I've never traded on Schwab so can't speak for it's analytics. I can't trade options per my firms compliance rules so it's been years since I've used any for anything besides shares, so I'm a few years behind on the platforms.

RockhopperZP

^ This is true. Some of these market makers participate in PFOF via execution services subsidiaries. They do have to ultimately cross all SPX trades on CBOE, but CBOE doesn't stop them from having PFOF arrangements with retail brokers.

moonkiska

From my understanding, and maybe you can confirm, the broker doesn't have any obligation to notify at all. The Time & Sales was an obvious bust. (https://imgur.com/a/mcHFsPC) Saying it is between trader and CBOE is bullshit though. First, you're not even allowed to talk to CBOE and must go through the broker. In addition, I'm one of the few retail that have a direct contact at CBOE. I was asking him questions about some of the details. A few he obviously couldn't answer due to privacy. I asked if looping Dale in would allow him to answer and he said he was wary of doing that as he shouldn't step between the broker and trader. There is definitely a disconnect in the chain here but I don't think anybody was particularly wrong per se. It's a rare event that happened on a historic move, otherwise, it'd be a non-event. As far as brokers, I disagree. TD/Schwab has been one of the best regarding 0dte through the years I've been trading it. IBKR's "manage your risk accordingly" has become a meme in our circles lol. Tasty is...Tasty. E-Trade, for some reason, has the least slippage but worst interface and even more clueless support. Tradier and Tradestation has been picking up as the automation platforms add them in.

RockhopperZP

That's brutal. If true this should 100% be on Schwab. Though I wouldn't be optimistic on the recourse options given T&Cs etc (liability was probably signed away). Saying it's between the retail trader and CBOE is just false. Schwab is the fiduciary between the customer and exchange, responsible for handling these types of events. Accepting a bust and not telling the customer until next day or updating the closing trade on the platform is horrible handling. Sounds like Schwab doesn't have an automated system, and the resolution team responsible for it was just way too late. The traders only mistake was using Schwab in the first place.

moonkiska

Wrong. CBOE absolutely has market makers and routing partners. Here is a list: ```Akuna Securities LLC All Options USA LLC Barclays Capital Inc. Belvedere Trading LLC Black Edge Securities LLC BNP Paribas Securities Corp. BofA Securities, Inc. BTIG, LLC Casey Securities LLC Citadel Securities LLC Citigroup Global Markets Inc. Consolidated Trading LLC CTC LLC Dash Financial Technologies LLC DRW Securities, LLC Dynamex Trading LLC Geneva Stock, LLC Global Execution Brokers, LP Group One Trading LLC HAP Trading, LLC HRT Financial LP IMC Securities LLC IMC-Chicago, LLC dba IMC Financial Markets Instinet, LLC Interactive Brokers Corp. J.P. Morgan Securities LLC Jane Street Capital, LLC Jane Street Options, LLC Jefferies LLC Jump Trading, LLC Lakeshore Securities, L.P. Lamberson Capital LLC Marathon Trading Group LLC Matrix Executions, LLC Maven Global Markets Trading LLP Morgan Stanley & Co. LLC National Financial Services LLC Old Mission Capital, LLC Old Mission Markets LLC Optiver US LLC RBC Capital Markets, LLC RQD* Clearing, LLC SG Americas Securities, LLC Simplex Trading, LLC SpiderRock EXS LLC Sumo Capital LLC Susquehanna Investment Group Susquehanna Securities, LLC TJM Investments, LLC Tower Principal Markets LLC TradeZero America, Inc. TRC Markets LLC UBS Financial Services Inc. UBS Securities LLC Vanaheim Securities, LLC Velocity Clearing, LLC Virtu Americas LLC Vision Financial Markets LLC Walleye Trading LLC Wells Fargo Securities, LLC Wolverine Execution Services, LLC Wolverine Trading, LLC X-Change Financial Access, LLC XR Securities LLC```

31andnotdone

where am i supposed to donate money today if the CBOE won't take it

Longshortequities

Wrong. Schwab does not receive PFOF on SPX options, because SPX is a proprietary index product that trades exclusively on CBOE. SPX options are not standard equity or ETF options - they are index options that trade exclusively on CBOE. Therefore, because SPX is a proprietary product, SPX is not available for routing to multiple market makers or off-exchange venues. There is NO opportunity for Schwab (or any broker) to receive PFOF from routing SPX orders to third-party market makers. The PFOF model relies on brokers having a choice of where to route orders, and market makers paying for that order flow. With SPX, Schwab must send ALL orders directly to the Cboe, so PFOF does not apply.

ElHoser

So he closed the short side for a small price (IIRC he said around a dollar) and then sold his longs? A few seconds after closing the short side the price jumped by a factor of ten, and the CBOE said it wasn't a fair price? Why then did they allow the sale of the long side to go through? It should have also jumped in price.

RockhopperZP

Can't speak for PFOF arrangements. It's not in my wheelhouse. My desk does not trade retail or do PFOF. However in public CBOE trading you can't just bust because a trade is a loser. ^that said, the counterparty being able to accept/reject is a big piece preventing that. The contra generally won't accept busting a winning trade. If Schwab accepted the bust, that safety is gone for the customer. ^but reputationally etc, that policy would be disastrous for Schwab. Nobody will trade if it's blatantly rigged like that. So if I had to bet, I'd bet the trader missed something and is omitting that from the story. I just have a hard time believing Schwab would have such a horrible policy for their clients (auto-accept busts of winning trades and never notify the trader)

RockhopperZP

The counterparty requesting the bust is anonymous on CBOE.

ryanzw

Few weeks ago on one of the big red days I bought a 0TDE SPX call near the low of the day for $220 and sold it 10 min later on a quick spike up for $600. Money was in my account and fill was confirmed but after the close the 600$ was removed and I finally figured out days later CBOE had busted the trade. Robinhood never notified me of the bust and I had to fight back and forth with their terrible customer support to finally figure out what happened. No idea why the trade was busted and no help from Robinhood. I emailed CBOE to ask if they could tell me when Robinhood was notified but they couldn’t.

ryanzw

CBOE busted my SPX trade for $600 recently, so annoying.

AskFeeling

That's exactly what he said likely happened. So he got a very good fill on the long side of his spread right before the pop. It could've been that his fill was at $100 for each long call, and then the next filled price was 10x that. The MM that sold to him likely complained to the CBOE, and they 'busted' the long side of the trade. It didn't disappear from his brokerage UI immediately, so he didn't know he was exposed to maximum risk on the short side. Scary shit

kokkomo

CBOE is the one that needs to be busted. Fucking hit them and Citadel with Antitrust laws.

RockhopperZP

I work at one of the largest market makers in CBOE SPX. The culpability is either on this trader, or his broker (Schwab). Executed trades on SPX can be busted if one side requests it due to special circumstances (as a MM we receive these requests daily). The counterparty has to approve the bust before it's consummated. You always have the right to refuse the bust requests, and keep the trade. This trader should have had that right as well. If you missed/ignored the notification (CBOE emails us), I honestly don't know 100% what would happen, but I expect the bust would not happen. However we've never missed one of those emails, so again I can't say 100% that the bust would not happen. We have a direct relationship with CBOE, so get these emails. Being a customer trading via broker, I believe (not 100%) that the broker will receive the bust request, not the trader directly. Given the trading/clearing process, I expect CBOE would not be able to contact the end trader directly, just his broker. Schwab should have 100% flagged this bust request ASAP. I'd be shocked if they did not have an automated system to do this, but of course can't say 100%. If I had to bet, I'd say most likely the trader missed the notification from Schwab. If no notification was given by Schwab, I'd say this trader absolutely has a legitimate grievance against Schwab. But who knows what's in the T+C he'd have signed to trade via Schwab, so there may be no legal recourse.

PelosiQT

Very possible if the called erroneous trade. A “clearly erroneous trade” rule allows CBOE to cancel trades deemed way off fair value, especially if market makers request a review.

spudleego

These guys are painful at explaining this but am I understanding this right that he sold a call spread. A vertical? And he closed the short leg to let the long run so his max loss would have been 13k but CBOE nullified the short leg buy back leaving him on the hook for the difference between the spreads? Problem is he had already closed 4 of the long legs so he was left wide open on on the shorts they reinstated.

moorhound

Judging by the CBOE options data, MMs are gonna pop this right around 528 at close to fuck everybody's puts and calls

Guinness

Sorry I’m confused, is Donald Trump the head of private companies NYSE, NASDAQ, CBOE, and CME?