Trade Busted - Trader unexpectedly loses over $100K - Detailed post-mortem analysis

Summary

In this detailed analysis, we explore a trader's unexpected $100,000 loss due to a trade bust involving out-of-money call credit spreads. The video dives into the mechanics behind trade busts, the emotional impact on traders, and the procedural steps involved in handling such exchanges. The creator, Trading Dominion, dissects the events, emphasizing the importance of understanding the rules surrounding complex trades and the potential pitfalls of trading strategies that are not well comprehended by the trader.

Highlights

• A trader encountered a $100K loss due to a busted trade; understanding trade busts is essential! 🚨
• The trader's partial fills and broker notifications impacted trade outcomes significantly 📉
• Despite having a defined risk, the trade became an unlimited risk scenario due to execution errors 🔄
• Monitoring risk graphs could have highlighted large potential losses early on 📊
• Trading in high volatility requires strict adherence to the trading plan 📜
• The exchange's notification timing played a role, although earlier notification would hardly have changed outcomes ✉️
• Legging out of trades increased losses, underscoring the importance of orderly exits ⚖️
• Trade busts can't bust individual legs of complex trades if entered correctly 🛡️
• Mixed communication regarding trade intentions and execution underlined several pitfalls 🎤

Key Takeaways

• Trade busts can erase executed trades, restoring previous positions as if the trade never happened 🤯.
• Defined risk trades can morph into unlimited risk scenarios if mishandled 😨.
• Understanding the rules of engagement in complex trades is crucial 📚.
• Emotional control is key; avoid rushing into decision-making during volatile markets 🚦.
• Zero DTE (Days to Expiry) trades require vigilant monitoring 📈.
• Complex trades should be monitored visually; risk graphs are invaluable tools 👀.
• Always align trading actions with your pre-defined trade plan 📋.
• Partial fills and broker communications play a critical role in trade outcomes 📬.
• Close attention to market dynamics and bid-ask spreads is essential during high volatility ⚡.
• Avoid legging out in volatile conditions unless there's no alternative ⛔.

Overview

In the video, the unfolding of a disastrous trade scenario provides critical insights into both trade mechanics and emotional challenges faced by traders. A trade bust wiped out executed orders, turning a manageable risk into a nightmarish loss. The analysis unfolds how communication lapses and a failure to adhere to a predefined plan exacerbated the situation.

Dale, the trader, struggled to mitigate his losses due to incorrect trade execution and a misunderstanding of market dynamics. The layout of his trades exposed him to risks he hadn't anticipated, primarily due to an incorrect setup of a profit-taking order that triggered a spiral of unfortunate events.

Trading experts emphasize the importance of understanding all facets of your trades and the environmental conditions, especially during volatile markets. When dealing in zero DTE trades, constant vigilance is essential to avoid disastrous outcomes. The video serves as a cautionary tale that reinforces the need for thorough knowledge and readiness when participating in high-stakes trading.

Chapters

• 00:00 - 01:30: Introduction and Overview The chapter "Introduction and Overview" discusses the postmortem analysis of a trade bust. The discussion originates from TD's various channels and has also garnered attention online. The focus is on a trader named Dale, who initiated a specific type of trade that is under examination.
• 01:30 - 03:30: Explaining Trade Bust The chapter titled 'Explaining Trade Bust' delves into the concept of a trade bust in the financial markets. It begins with a brief mention of out-of-the-money call credit spreads. The main focus is on the process and reasoning behind a trade bust, which occurs when an exchange identifies an error in the execution of a trade, typically due to a significant pricing mistake. Once recognized, the exchange decides to nullify or 'bust' the trade to correct the error. This chapter provides a foundational understanding of how trade busts function to maintain market integrity.
• 03:30 - 04:30: Personal Experience and Objective This chapter delves into the complexities of trade busts, which effectively erase a trade from history as though it never happened, reinstating previous positions. The narrative is personalized through a trader's experience who suffers an unforeseen loss exceeding $100,000 due to a trade bust, highlighting the emotional turmoil and challenges faced in such scenarios.
• 04:30 - 09:30: Trade Setup and Missteps The chapter titled 'Trade Setup and Missteps' involves a detailed analysis of past trading errors. The speaker emphasizes the objective of learning from these experiences by focusing strictly on the facts. They share personal anecdotes about significant financial losses in the markets due to earlier mistakes, acknowledging that these occurred some time ago. This postmortem aims to extract valuable lessons from past errors to prevent future missteps.
• 09:30 - 12:30: Lesson on Monitoring Risk Graphs The chapter reflects on the author's experience of losing money by blindly following trading gurus without truly understanding the market or the strategies they were employing. This pivotal moment served as a wake-up call, urging the author to adopt a path of self-learning and personal accountability in trading. The narrative conveys empathy for others, like Dale, who experience similar financial setbacks, emphasizing the emotional impact and the critical lesson of learning to manage and monitor risks independently.
• 12:30 - 15:00: Outcome and Impact of Trade Bust The chapter discusses the widespread reaction and outrage on the internet regarding what many perceive as an injustice done to an individual by a broker, leading to calls for public action such as organizing rallies, reaching out to Congress members, and raising money to support the affected person.
• 15:00 - 18:10: Final Thoughts and Lessons Learned This chapter focuses on analyzing facts from various perspectives without taking sides. The narrator expresses compassion for an individual named Dale, while emphasizing the importance of learning from the situation without bias.
• 18:10 - 21:30: SIBO's Role and Rules Clarity The chapter "SIBO's Role and Rules Clarity" stresses the importance of reflecting on and analyzing mistakes instead of seeking superficial comfort or sympathy. It underlines the necessity of understanding errors, recognizing the rules that were in play, and identifying how to prevent similar issues in the future. The focus is on fostering a deeper comprehension of incidents to enhance learning and self-improvement, rather than merely avoiding discomfort or responsibility.
• 21:30 - 25:50: Analyzing Mistakes and Recommendations This chapter discusses the critical analysis of mistakes and provides recommendations to avoid similar pitfalls. It begins by addressing the problems faced by Dell, specifically focusing on financial losses, and emphasizes the importance of learning from past experiences to prevent future monetary losses. The chapter is fact-focused and relies heavily on data, making use of text-heavy slides as a means to dissect the issues thoroughly.

Trade Busted - Trader unexpectedly loses over $100K - Detailed post-mortem analysis Transcription

• 00:00 - 00:30 today we are going to go through a postmortem of a trade bust And this is something that was that's been discussed here in TD in a couple of our channels Um and there's also been a bunch of uh people on the internet that have been creating uh either well we've had the original person let's just call him Dale uh that's his actual name a trader that had put on a particular type of trade
• 00:30 - 01:00 which are basically just um out of the money call credit spreads and stuff happened Uh he had a trade bust A trade bus by the way is just when the exchange realizes that there was something wrong with execution So in other words a price that was crazy uh was executed And then when that realization happens they then say "Nope that was that was wrong So we'll bust the trade." And busting the
• 01:00 - 01:30 trade literally means like wiping it from history as if it if that execution never happened So whatever was before comes back to life Uh on the assumption that you were closing something off it comes back to life So that's basically a trade bust It can definitely take people by surprise It took this trader by surprise for sure And this trader then took an unexpected slightly over $100,000 loss which is clearly very ugly and is gut-wrenching when this kind of
• 01:30 - 02:00 stuff happens And today we'll basically be going in through to a very detailed postmortem on this Now let me start by saying what is the objective here The objective here is to purely look at facts and try to learn from this experience I have been in the position where I've personally lost plenty of money in in the markets through through some mistakes In my case it was quite a while back from just
• 02:00 - 02:30 following gurus blindly when I was you know learning in my initial stages And that to me was the final straw when I lost you know a ton of money from following following these gurus blindly without truly understanding what I was doing And that led me through to uh moving away from that path and and really needing to to learn how to do stuff myself But I've been in that in that position where you just lose a ton of money and it rips you apart you know and you feel terrible I definitely feel for Dale I I know what it's like uh to
• 02:30 - 03:00 be in his shoes and it's horrible That said there's a lot of information going around on the internet now where there's people saying "Oh Sibo screwed him or Schwab which was his broker completely screwed him and how dare they and this is an injustice and let's organize rallies and let's let's you know contact Congress people and blah blah blah and you know let's let's put money together for Dal because he's he's been totally screwed and blah blah." So um there's a
• 03:00 - 03:30 lot of that going around and my objective here is to again purely look at facts without taking anybody's side Okay i'm not going to take SIBO's side I'm not going to take Schwab's side and I'm not going to take Dale's side either Uh even though I've got compassion for Dale and I feel for him right i feel horrible I know what it's like Nobody wants to be in that particular position But we need to try to learn from what
• 03:30 - 04:00 happened Okay if you go through pain it's it's a it's a waste if you don't take time to think about what went wrong to properly analyze stuff rather than simply having someone pat you on the head and say "Oh poor boy." Okay that's not the objective That doesn't help What what helps is to figure out what went wrong were mistakes made what were the rules and how do we avoid this situation for ourselves so that we don't run into
• 04:00 - 04:30 the same problem and go through this horrible experience of what Dell has gone through which is losing money Nobody wants to lose that and especially losing a ton of money So that is where I'm coming from and I'm going to purely focus on facts and that's it Now uh the other thing is that the slides uh due to the fact that they're this is basically a postmortem it's going to be very datadriven and therefore the slides are going to be a lot more text heavy than
• 04:30 - 05:00 what I'm personally comfortable with So I apologize in advance for for that Okay All right So let's get into it Starting up we're going to look at what was the trade that was uh done So uh this trade was placed on April 9th 2025 10:30 a.m Central Uh I've mentioned that the traders uh trader's name is Dale and he basically just sold 10 call credit spreads Okay you'll you'll sometimes interchangeably hear me
• 05:00 - 05:30 calling him a vertical That's just another common name for it but it's basically just a call credit spread That's the acronym You'll see this acronym throughout the slides as well so don't get confused by that Um and so he basically had his shorts at 5165 and his longs at 5200 Here the shorts were at 591 Longs over here were priced at 3 bucks 51 This was a zero DTE trade and uh so based on this particular width you
• 05:30 - 06:00 can see that that was a 35 point wide call credit spread which was out of the money Now um the credit received per spread over here was essentially what two bucks 40 on on the spread itself but then with the contract multiplier of 100 that gives you a credit of $240 per call credit spread and he was doing 10 of them So that therefore implies that he got a credit of $2,400 for his 10 lot call credit spread
• 06:00 - 06:30 the max risk on that particular trade for a vertical here is well in this case it's really just the width which was the 35 point wide width there minus the credit received over here which is basically this amount of money here So it's 35 points minus 2.4 right which is the the contract level um credit received per per call credit spread and that comes through to 32.6 six Multiply that by the contract multiplier in SPX which is 100 That basically means that
• 06:30 - 07:00 he's got a risk of $3.2,000 per call credit spread So on 10 call credit spreads he's got a risk of total risk of 32.6K I've reviewed every YouTube video that I could find which were were basically three Um here actually well four if you count a podcast So um but basically I've I've reviewed everything that I could see on the internet in
• 07:00 - 07:30 terms of existing reviews and primarily by Dell Okay So this is Dell getting on and you know fully explaining what happened and uh of course he's doing this to try to uh get the word out that you know he was screwed by by and it's all unfair and there's been an injustice and blah blah blah blah So um which I I understand you know that he's doing that from from his perspective but again we're just going to focus on facts today Now um in those explanations of him
• 07:30 - 08:00 describing the trade in no video did he mention anything about any kind of max planned loss level I don't know for a fact if he had one but the fact that this is a zero DTE trade I can tell you that you don't go about adjusting these types of trades when you're playing in zero DTE land Most of the time the trades that you have you put on are going to be slap on slap off type of thing So you can't do the types of
• 08:00 - 08:30 things that we would normally do in in our community where you know we're making adjustments day by day that kind of stuff Forget about all that It's basically typically a slap on slap off type of trade and he mentioned no planned max loss level My assumption therefore is that he's in a situation where he is willing to risk this amount of money in order to make this amount of money here So if you then convert that into essentially a ratio he's basically
• 08:30 - 09:00 willing to have a loss that is 13.6 six times larger than the profit that he is hopefully looking to make Again very different through to how we normally do things The thing that I typically teach is keep your planned max loss to about two to three times whatever your profit target is To me that's reasonable That's the way that I like to do things Um you can see this is very different here but primarily
• 09:00 - 09:30 because we're now talking about zero DTE right there's no concept of making adjustments It's slap on slap off The trader Dale here uh is saying that he put on a defined risk trade So at this point in time is that accurate well yeah it is because he's basically putting on 10 call credit spreads and doing that as a single order So that gets filled 10 core credit spreads are on That is a defined risk trade Okay So let's look at that And in
• 09:30 - 10:00 terms of what this thing looks like visually and we've got our uh 10 shorts over here at 5165 and then we've got our 10 longs here at 5200 I went in and and set my time If you see my time over here this is because I'm in Pacific and uh Dell was in central Okay so he put it on at 10:30 I'm in Pacific so therefore it's 2 hours earlier right so that's why you'll see that Uh and then once I committed the uh
• 10:00 - 10:30 trade I then went in through to the trade log and then went through and manually tweaked the prices here in order to make it exactly match what Dell had been filled on which were the details that he uh previously gave and we saw on this particular slide right these these numbers over here Therefore this is exactly the trade that he would have been trading over
• 10:30 - 11:00 here You can see that we've got our $2400 um amount of money that we can make if it expires anywhere from here down Okay But you could see that we also have our 32.6K max loss over here If SPX goes from here to the upside and crosses this kind of threshold okay at that point you've got your 30 $3,200
• 11:00 - 11:30 loss there So but it is a defined risk trade No matter how much S&P goes up the maximum loss over here is going to be 32.6K Now it's still almost 14 times the amount of money that he could potentially make which I think is uh well it's not the type of trade that I like to put on but it is a defined risk rate Next step once his trade is filled he then goes in and he puts on a profit taking order We saw over here that each
• 11:30 - 12:00 call credit spread over here had a credit of 240 Then in I've referenced everything over here so you can invalidate everything I'm saying here But basically one of the the videos over here you see the URL there from uh some dude called speaking Greeks and at time index 1523 Dell says I normally close half of my spreads at 50% of the max value Now he's putting on 10 call credit
• 12:00 - 12:30 spreads If he's saying that he closes half of his spreads that implies that he's going to take profit on half of 10 which is five All right so on five call credit spreads he plans to take profit on that When does he do that when he's at 50% of the maxed he calls it the max value but basically he's referring through to the credit received which is this guy over here So when this is cut in half so when this
• 12:30 - 13:00 gets through to a buck 20 for the call credit spread he's going to take five of them off That's how he described his trade plan He didn't do that though in terms of the order that he put in He put in an order over here not to buy back the call credit spreads for a buck 20 which is what his trade plan based on what he exactly said over here at this particular time index right would have implied This is what his trade plan
• 13:00 - 13:30 would have suggested right five core credit spreads We take them off for half of the credit received at a buck 20 What he did though is he placed a limit order over here on a buck 20 So that part matches right in terms of this being half of this but instead of putting on the call credit spread he put it on the short calls only So he's got a minus 10 and a plus 10 like like this Okay for the actual spread The spread should have been shut
• 13:30 - 14:00 down for a buck 20 He's not doing that He's taking this price over here but applying it only through to the 10 shorts Now if you go back you could see that the shorts over here were originally priced 591 This is 591 So if your trade plan is to now do something on the shorts then if you're using this 50% kind of ratio then that would imply that you want to sell off these shorts when they've lost half of their value But then that would imply a limit price
• 14:00 - 14:30 of 295 which is half of 591 not a buck 20 A buck 20 is half the price of the spread And so that is one issue The other issue is that instead of taking off half like his trade plan said he actually put on this limit order of a buck 20 on all 10 of his short calls That's not taking off half of your spreads That's taking off essentially all of your shorts That's a completely different thing to what he has specified in his trade plan That is just me kind of being nitpicky
• 14:30 - 15:00 probably as a as a as a teacher in terms of you know I always teach that whatever your trade plan is you need to trade it Okay Uh you don't make stuff up on the fly Now it's possible that he miscommunicated what he was saying here The thing is he miscommunicated this multiple times on every video that I saw So I don't think it was a miscommunication Regardless of that this has is just like a a side uh comment um it's got nothing to do with the actual trade bust right um which we'll go into
• 15:00 - 15:30 detail So the two errors here just based on a mismatch between his trade plan and what he actually did over here uh I've I've already kind of covered right so instead of placing the the the limit order on the call credit spreads and only addressing half of the call credit spreads he's putting his limit order on the shorts only at a price that does not match a reduction in in in half of that particular uh cost because it ignores the cost of the long that's behind it
• 15:30 - 16:00 And then he's doing it on all 10 contracts instead of on half which is what his trade plan claimed Okay So uh we already have multiple things over here that are not matching based on what his trade plan appears to be and what he communicated in in multiple videos over there So but regardless of these potential errors cuz I don't know for a fact that they're they're errors It's possible he could have just miscommunicated what his trade plan was
• 16:00 - 16:30 Uh but basically the point is that he's now got a profit taking order to buy back all 10 of these short calls for a limit price of a buck 20 That's where we're at Moving on This is just extra confirmation here of one of the sources So this is the URL over here on Reddit You can see here that he's he's basically saying "Yes I'm the guy uh painfully explaining it blah blah." So this over here is Dale and uh you can see here that he's he's saying exactly
• 16:30 - 17:00 the same thing again that he sold uh the each spread for 220 and then he created a profit taking order here which was a target of 50% of max credit but the credit of the call credit spread and then he's uh placing uh this as a resting order to buy to close all 10 of the um those shorts and then he's saying that four out of and of those contracts got filled which we'll get to in a sec But again that's just extra confirmation
• 17:00 - 17:30 that this is exactly what he did Now if you leg in or out of a vertical the question cuz remember when you put on a vertical that vertical did have defined risk But now if you place an order to on a leg basis now either remove or add through to any any one of these two particular legs do you now have a defined risk well maybe not So this is the first thing that we're going to
• 17:30 - 18:00 start encountering because even though we start off with a defined risk trade which you cannot lose more than 32.6K 6K over here cuz remember the whole point here is that at the end of this we'll see that this trader has lost over $100,000 So you might say what the hell and this is exactly what he's saying He's saying very much what the hell and I've been screwed Um because he put on originally put on a trade that had a max risk of 32.6 no more than that And yet how can he possibly lose $100,000 and
• 18:00 - 18:30 that's what we're going to be exploring here So the first little breadcrumb on the path to understanding this is seeing that he did not put on a order to peel off half of his call credit spreads Had he done that that would have been a defined risk move as well for that profit taking order Uh and then we're also going to see how this could have eventuated if the call credit spread itself had been busted instead of the individual short But this is coming up
• 18:30 - 19:00 later on Okay So then over here I'm basically saying the scenario what's the best outcome uh sorry in this scenario where the best outcome happens and you're able to get that uh profit uh taking order filled what do you expect the underlying to be doing at the time So in other words what I'm saying is that you're putting on some call credit spreads SPX is currently here Uh in the best outcome scenario where you're you're going to be having a profit taking order that gets
• 19:00 - 19:30 filled what's going to happen well two potential things One of them is that S&P comes down or the other thing is that time goes by Now this is again a zero DTE trade but we'll see that his profit taking order got partially filled 2 hours after he put it on That's not sufficient time for this to really go that high So typically what's going to happen is that you're going to expect S&P in this particular case to basically be coming down if your profit taking
• 19:30 - 20:00 order is going to fill And on this particular day what we saw was S&P massively going to the upside So if S&P is massively going to the upside really fast why would your profit taking order fill that does not make sense Okay but that's something to just think about and we'll touch on this in a sec too So now remember he's put on a limit order to
• 20:00 - 20:30 buy back all 10 of his short calls for a buck 20 And 2 hours after he puts the trade on at 12:20 p.m Central he gets a partial fill of four of these 10 contracts at the limit price that he had set which was a buck 20 And you can see this is his uh screenshot apparently And you can see a buck 20 over here Four contracts over here to close Um and he got that fill over here at 12 almost at
• 20:30 - 21:00 12:20 Okay So what was SPX doing at this time it was massively going up higher So that should have been something that made him go "Hm I wonder why my profit taking order got filled." If S&P is massively going higher so the market is ripping higher Do you expect a 5165 option contract to be valued more or less well clearly if over here if
• 21:00 - 21:30 um the market is coming to your option your option is increasing in dollar value Uh just think of it when the further out of the money you go the cheaper those options are And as the market now comes towards the the the strike that you you traded at it is increasing in value because it's now closer to at the money So um if he was in a position over here where his original sell price of his short calls was 5 bucks 91 and this is out of the money by a
• 21:30 - 22:00 decent amount from where the market was which was here originally and now the market is screaming to the upside This 591 is not going to go down through to $120 because when S&P is here it's far closer to this contract than it was before So therefore the value of this contract has to be higher over here Instead of being 591 it might now be 10 as an example Okay but it's going up not
• 22:00 - 22:30 down It's going to be it would go down to 120 if SPX went this way and your out- of-the- money contract now becomes really far out of the money and therefore its value overall decreases And that's basically what I'm saying here So um uh you originally sold the uh contract for 591 The contract has now jumped in value to around $17 at this point in time Is that going to show up as a profit or as a loss for your position well clearly it's going to be a loss because you're selling it
• 22:30 - 23:00 originally for $5.91 And if you had to close this out you then have to buy it back for $17 That's a loss A pretty big one too And then the other one is what did the risk graph look like at the time now this is a zero DTE trade So when you're doing a zero DTE trade if you've not done this before you your eyeballs have to be glued to the screen all day long You got to watch your position like a hawk Okay stuff moves really quick uh in this kind of scenario It's it's
• 23:00 - 23:30 literally day trading So was he looking at a risk graph is one of the questions Now he didn't mention if you cuz some people just like to trade ba based on so-called math You know they just track the the prices that they're getting for fills and put it into a spreadsheet or something like that and that's how they trade Okay I think that's crazy if that's how how you're trading you know to forego a visual panel that provides a ton of useful information just by looking at a
• 23:30 - 24:00 picture is kind of crazy um for me anyway to for people that don't look at a risk graph Okay so but I don't know He's never mentioned anything about a risk graph I'm hoping he was but then we've got an issue right because if he was this is the picture he's looking at over here This is where he currently is based on just based on mid prices Bidden asks are very wide at this point in time or fairly wide cuz remember these prices reflect the
• 24:00 - 24:30 assumption that you're getting filled based on mid if you were to you know exit your position or to work out your actual P&L In reality if if uh you're going to have a a fair amount of slippage you're not going to be here You're going to take a loss- because of slippage So overall you might actually be down here Regardless of that even if you are here you're now looking at a $22,000 loss on your initial fixed risk trade This is by by the way the original position of 10 call credit spreads Okay
• 24:30 - 25:00 we're we're not yet looking at the fact that he had a partial fill on four uh contracts but if he's tracking this visually using a risk graph over here regardless of what software he's using if he's just using the broker software um mind you you know the broker software at IB for the risk graphs is just horrible Um so you really do need to to use something like this But in this in his case he was using Schwab Toss has
• 25:00 - 25:30 good risk graph analysis So he should have absolutely been able to to see this kind of thing in toss and see visually that at the time that he was filled on this partial fill his risk graph was showing he was down $22,000 That should be obvious from looking at this Okay The second thing is that when you then go through to the chain over here and you then eyeball the price the mid price of this short
• 25:30 - 26:00 strike at the time that he was filled okay at 1220 there's only a 20 second difference over here Option L explorer here was showing a price of $107 for this short call He got filled at a buck 20 on this particular contract you know how how is that not a not a warning bell so you know was he looking at a risk graph I don't know if he was not that is unwise if he was then you
• 26:00 - 26:30 know how do you miss this the fact that your position is down very significantly and the fact that your chain is telling you that the price is completely different through to the price that you just got filled at this is just pretty much saying what what what I mentioned for right the risk graph if you looking at that shows you at a substantial loss and yet your profit taking order just got filled that has to be a warning bell to you then if we look at the matrix we
• 26:30 - 27:00 could see that the 53 uh 5135 strike over here was currently priced at 107 and yet his partial fill order here was for a buck 20 and again I'm just referencing the two things here like the risk graph and the fact that the matrix is showing a completely different price over here Plus also if if you scan through the prices over here to see if maybe is this just like a mispricing of this one strike Well no It's in line with all of the other mid prices from all of the
• 27:00 - 27:30 other strikes that you see through here A buck 20 is nowhere near it Okay So two warning bells over here that that should have gone off for I think a fairly normal average trader right should have should have been able to see that kind of thing So now let's talk about the situation where he has now been partially filled So he's been partially filled on four of these short calls over here If we go in and add
• 27:30 - 28:00 these four short four longs right which he's essentially closing out four of his existing shorts but it's essentially buying four long puts over here If he's buying four long puts at the current so-called fair market price at the mid this is what his position would morph to So he originally had the call credit spread which is the blue line over here And his position is now morphed into a call back ratio Okay CBR and this is what his
• 28:00 - 28:30 position would look like based on normal pricing Now in his case though he's reporting that his platform was telling him that um this was not necessarily what was going on because he succeeded at closing four of these contracts not at 107 but at a buck 20 Now remember if he sold it at let's round it up through to say $6 for this particular contract and now it's at $107
• 28:30 - 29:00 they'd have to buy it back That's a big loss But if he can buy this these four contracts for a buck 20 then he's now making money on those four contracts So therefore the risk graph would to him potentially look different So let's look at what that looks like And before I do that though is the callback ratio here still a fixed risk trade you would say yes the
• 29:00 - 29:30 possible total max risk over here now has deepened a bit Or I guess you could even look at this You know if you were super unlucky you you could expire right down here and this would be your your max risk But it's still defined It's not like an unlimited downside So it is still there And on top of that if the market is screaming higher the market is going this way and you're now on this path over here are you that worried about having to rush to close things
• 29:30 - 30:00 down well no because the more that the market goes higher the more money you're going to make You would be concerned though of the market kind of reverting back down And uh in this case you're now riding the curve down this particular way here right but let's stick through to what in theory he might have seen on his particular platform at the time because he got a fill on these four contracts at a ridiculous price of a buck 20 instead of 107 over here And so
• 30:00 - 30:30 what I've done here is once I committed that adjustment of you know the plus4 over here you can see that the minus 10 has has been reduced through to now minus 6 But then I went in through to the trade log and then tweaked the price of that particular contract through to A120 to make it match what his fill would have shown on his And as you'd expect it shifts that entire risk graph higher because of the fact that instead
• 30:30 - 31:00 of taking a huge loss on that transaction of having to buy the four contracts at at a huge loss he's now actually making money on on those right um and also on top of that the the extra longs that he's got over here they have massively increased in value So the entire position is basically showing like a $20,000 profit over here based on his actual full prices Now that can definitely be disconcerting if you're
• 31:00 - 31:30 looking at your platform and your platform is telling you that you know you're you're essentially up money but in reality you're down money based on fair pricing Uh so for sure that that can that can be challenging What does he do next he then goes through and as a matter of fact let's just talk about what his position is I'm just going to break this thing up and uh do it in chunks like this So this is you know totals over
• 31:30 - 32:00 here is you know - 10 and plus 10 which are the 10 core credit spreads that he was trading But let's just break it up like this Now what got filled on his side was essentially cancelelling off these four short calls that he had What it leaves in his account is a combination of this down here which are six call credit spreads and an extra four long puts over here because four of these guys over
• 32:00 - 32:30 here got filled by this partial fill So this is his remaining position So he's got six call credit spreads still at 5165 5200 He's got a max risk of 3.2K per call credit spread like we talked about before And this is if S&P keeps going up uh or stays where it is at that time anyway cuz it it had already moved up very significantly And he's then got four extra long calls at 5200 which are these guys over here And since uh he uh
• 32:30 - 33:00 you know purchased it at 3551 each that's $351 per long call times 4 essentially of risk if S&P now comes back down or closes below 5203 All right So that is his position What does he do he actually then decides to go go through and buys back to close all of those remaining six short calls that he had So instead of shutting this thing down because remember and this addresses what
• 33:00 - 33:30 Brandon was was uh asking about before So if you've got a call credit spread so in his case he had six call credit spreads remaining do you shut this thing down as a call credit spread now the comment that was made is that if you're doing zero DTE kind of trades and there is zero value left over here in this long then you're in a scenario that you can't actually shut down the core credit spread because you've got essentially no
• 33:30 - 34:00 bids on on on the long So therefore as a spread you can't shut it down So you've got no option other than to go here and to close down just these shorts and you just let these six guys over here just expire That's fine But that's in the instance that the back option has no value left Are we in that scenario over here this back option has a value of $83 Plenty of value there So should you
• 34:00 - 34:30 go through and close this down now as a core credit spread or should you leg out well remember we just explained why you would leg out That's only in the instance that your back option has no value left and you you can't close it because there's there no bids there If you were in a scenario that you close this thing out as a call credit spread what is the essentially the worst possible fill that you can get well the worst possible fill would be the max risk that is possible on that particular strategy on that call credit spread
• 34:30 - 35:00 which was the $3.2,000 per spread That's the worst fill that you can get If you leg out though at a time when the market is crazy volatile and there's value still in both of these legs you're taking a big risk here Okay because you you go in now and now you've got to get you got to close down this particular leg over here You're going to have significant slippage on that number one Then you got to put in a separate
• 35:00 - 35:30 order to do the same thing over here and close off these guys You're also then going to have slippage on this particular leg And on top of that the amount of time between this trade and this trade that has happened In this case you'll see that there's only 1 minute of time went by but the market was still screaming uh higher You eat that by laying out So you've taken slippage here you've taken slippage here and you've taken the time differential here of SPX moving
• 35:30 - 36:00 All three of those you have to eat in terms of losses that you're going to take Whereas if you just simply close out the entire spread when there's value in both So therefore it can be closed out as a spread Closing it out as a spread is a limited risk way of just shutting that thing down And you know what your max circled loss is which is the the the width minus the credit received But anyway in in his particular case even though there was plenty of value in the back option he's still
• 36:00 - 36:30 going through and buying back to close all of those six remaining shorts that he had from these six call credit spreads And then he goes through and also then exits the 10 longs on the back of those for 9130 per contract Okay and you can see screenshots of his orders down here So you can see this six to close at 15350 and then over here 10 to
• 36:30 - 37:00 close at 9130 Third warning bell here We've already covered the two right the risk graph and the option chain basically showing very very different information through to his partial fill which should have alerted him to the fact that something's wrong But we've got a third one here And the third one here is that remember he's got a partial fill already on four of those short calls He's then going and manually entering in this order
• 37:00 - 37:30 here to get filled on closing out the rest of the shorts He's getting filled at 15350 where he just had a partial fill at a buck 20 So even if you might say well you know he didn't notice the the original partial fill and he wasn't looking at a risk graph which again you got to be monitoring stuff like a hawk on zero DD trades So and but even if you say that
• 37:30 - 38:00 okay something weird happened and he didn't notice it Poor guy Okay he's now placing an order manually at 15350 even though he just had a partial at Buck 20 How is that not an alert for you a warning Bella goes "hm I wonder if something's wrong How can I possibly have been filled for a buck 20 when the current price here that I'm manually entering myself now there's no way he could have missed this He's manual entering it for
• 38:00 - 38:30 15350." Okay I just don't see how that could have been missed Um all right But what do I got here uh if your profit target order was either fully or partially hit then what yeah this is another thing right so let's just look at this risk graph here Remember I I mentioned this is based on the assumption that you can get filled at your mid price but the reality is that you're you're very likely going to have some slippage So you're probably going to be down here somewhere if you were to
• 38:30 - 39:00 try to get out Look at how far away you are from your total max risk that has already been defined So this is without you doing anything without you having to touch that particular trade you know for a fact that your max risk is going to be $32.6,000 So if you're down here and the market is wildly moving and you know the bid ask spreads are wide why would you even want to try and close this thing down You know that your max risk is this
• 39:00 - 39:30 guaranteed without you doing anything As a matter of fact I think I've got a spread a screenshot right here So this is on the six remaining call credit spreads over here This is where he was actually at at the time that he which is 10 minutes later Right by the time that he he managed to shut this thing down after the partial fill And again this is based on mid In reality he's probably down here once you're dealing with slippage But look he
• 39:30 - 40:00 he's like $2,000 away from his max risk for these six call credit spreads Why shut them down what's worse he's then going in and legging out of this leg first to close down the these these six over here He's then got slippage on that Then he he takes 1 minute to place the order to shut down these guys over here And then he eats the slippage on this He eats the
• 40:00 - 40:30 slippage on this and he hits the 1 minute of time that S&P was rushing higher during this particular time and he's got loss loss loss at a time where he could literally have done nothing and only suffered an extra $1 to $2,000 loss on these six call credit spreads This is another hint to me that he likely was not even looking at a risk graph Because if when you're looking at a risk graph and you realize that you're you know down
• 40:30 - 41:00 here why shut this thing down you're at max max risk already And how could Yeah I just don't understand people don't look at risk graphs If if that was the case I don't know that for a fact but I'm just trying to put things together And this is what this thing was was basically saying right if you are basically extremely close to your max loss on on a particular spread no point shutting it down You're already there As a matter of fact you could get lucky and the market
• 41:00 - 41:30 could then reverse and your losses may be less and in you know crazy kind of environments if you then get a huge move back down you might even come back to not having a loss at all on that particular trade piecing all of that together as well Another question that you know to ponder on is could it be that maybe he was looking at his risk graph over here knowing that he was in a loss situation in reality
• 41:30 - 42:00 but that he just kind of got lucky with these four contracts filling at about 20 for a profit and he just said sweet Something else that is kind of attached to this is the fact that remember his trade plan was to shut down half of his positions half of his spreads at 50% of the original credit received at a buck 20 But he closed down the entire position So why would he close down the entire position unless he realized that the entire position was at a loss anyway
• 42:00 - 42:30 so it's possible that Higodash have been looking at this and saying "Yeah I realize I I got a crazy fill that makes makes no sense but it's in my favor." So hey sweet But plenty of things already that you can see here that that are uh are mistakes along the way Now to get into the specifics of the six core credit spreads over here remember just by looking at that risk graph which is this guy over here we can
• 42:30 - 43:00 see there's really no point shutting this thing down You you were just like you know a,000 to $2,000 away from max loss anyway when the market is crazy volatile bid ask spreads are wide no point risking trying to get out of this because you're already pretty much at max loss If SPX were to come down you could reduce your losses or potentially even make some money if it comes back down below this particular level if that were to happen which wouldn't be that unusual right we after a big move day it's not
• 43:00 - 43:30 unusual to then have a bit of a pullback But look at what happened here So he's then going through and since he's legging out of these six call call uh credit spreads we go from a situation where the max risk per call credit spread was 32 bucks60 like we've looked at before right remember it's basically just 35 points wide minus a credit received coming through to a net of uh 3260 of
• 43:30 - 44:00 max risk that he can take per spread And yet by legging out he got filled at 153 on the shorts and at 9130 on the longs That is a loss of $6220 per spread He pretty much doubled his loss by legging out of the core credit spread
• 44:00 - 44:30 And the reality is that he could have literally have done nothing on these six remaining call credit spreads and just let them expire and that would have expired at this max loss here Yet by ling out he took he made it he literally doubled the loss that he took by laying out over here And this is of the six that were remaining Okay we're not talking about the the trade bust yet prior to him closing it out Remember
• 44:30 - 45:00 that on his platform because he was filled at um at a buck 20 for the the the um these four that he basically put on right he he's potentially looking at his platform and his platform is saying that he's actually up money But let's actually look at what happened over here exactly So this is the P&L he thinks he has based on the crazy price fill for the the four at a buck 20 So he originally sold so first of all with the
• 45:00 - 45:30 four uh short calls right that he got a partial fill on he originally sold these for 5.91 he bought them back he thinks for a buck 20 at least that's what the platform is telling him at the time Um so that's a profit of four bucks 71 Just you know the difference between these guys over here per contract He's got four of these contracts because we're dealing with four calls contract multiplier of 100 That basically means $1,800 or $1,900 profit on those four contracts Okay But then he's got an
• 45:30 - 46:00 additional six short calls cuz he originally had 10 call spreads over here So he is now remember this is I'm now talking about his actual order here of him now closing out this for 153 bucks each for the six remaining shorts Okay So he originally sold them for 591 He bought them back for 15350 each That's a loss of 147 bucks per contract on six
• 46:00 - 46:30 contracts after the contract multiplier That comes to a loss of $88,000 on the just closing out these additional six shorts Okay But then he goes and he manually closes out his longs Again just to prove it the screenshot again shows you that he's closing out the 10 longs for 9130 So he originally bought them for
• 46:30 - 47:00 351 He then sold them back out over here to close at 9130 Uh you do the math of what the profit is over here and that's a profit of 87 Let's round that up to 88 grand for those longs Uh you could see that this and this pretty much net out pretty close Uh and then he had like a small profit over here So overall add all of that up together he's got a small profit of about a,000 bucks This is what he thinks he has in his
• 47:00 - 47:30 account at the time Okay And I went through in option explorer and I basically did exactly the same thing So you saw what we originally um traded the 10 core credit spreads at the prices that he mentioned He then gets a partial fill for a buck 20 which I hardcoded into the price over here to to simulate that And then uh also hardcoded his actual fill price over here for buying back those uh six short calls And then the actual price for
• 47:30 - 48:00 buying back or closing out the 10 longs at the back And then if we look at the report and we add the commissions to the uh realized P&L you can see that over here matches the number that I had over here which confirms that all of this math is correct Okay But it's essentially let's just call it more or less a bit of a let's just say a scratch trade right he's out for like a grand or whatever made a little bit of money as far as he thinks on uh his platform at
• 48:00 - 48:30 the time prior to him realizing that the the trade had been uh busted which happens uh in a little bit So next day based on information from from Dell uh as reviewed on multiple videos he then says that uh the next day 5 minutes after the open on the next trading day uh he gets a voicemail from Schwab which is his broker and they tell him by the way I need to take it one step back here his commentary in his
• 48:30 - 49:00 videos was that he thought everything was fine from the prior day in his commentary He never says that he was freaking out because uh he thought you know something was wrong or anything like that on the prior day which makes you think that again he wasn't looking at the risk graph potentially He didn't realize that the the the real pricing for those four initial contracts that he got a partial fill from was at a ridiculous price
• 49:00 - 49:30 He basically thinks you know he was out for more or less scratch and everything's cool Okay So next day 5 minutes after the open he gets a voicemail from Schwab And Schwab is now informing them informing him that the exchange cuz the exchange over here is SIBO The exchange informs the broker In this case it's Schwab And then Schwab informs Dale So 5
• 49:30 - 50:00 minutes after the open Schwab over here informs Dale that Sibo had informed them Schwab the prior night and this is I'm literally quoting Dale here He says that the voicemail said that the prior night Sibo had informed Schwab and now 5 minutes after the open on the next trading day Schwab is informing him This is important by the way because this is a lot of the stuff again that's going around saying oh how dare SIBO and how
• 50:00 - 50:30 dare Schwab and they screwed him blah blah blah right that's ex this is exactly the data now that that we're looking at in terms of when did all of this kind of happen and how so the voicemail over here says that the essentially the four the partial fill that he got had been busted So the $120 price over here on the four contracts had been busted Remember busted simply means they wipe it as if the trade never executed in the first
• 50:30 - 51:00 place So if you originally had four short calls and then there was a trade over here to buy back four of these calls over here This is the the thing that got filled at a buck 20 SIBO then acknowledged this price made no sense whatsoever So they bust the whole thing and therefore this comes back to life So even though he thought he had closed out all of his position
• 51:00 - 51:30 manually more or less for scratch basically for about $1,000 profit the next day he's told "Oh by the way your account traded as if you left four short calls on at 5135 with the market having screamed higher and now that option having expired deep in the money Therefore that option got assigned and since spx is cash settled it settled to cash It basically
• 51:30 - 52:00 means you now owe us money So uh this is what I'm talking about here So the four short calls over here come back to life because the trade that closed them out got nullified got busted and therefore uh Dell's account was left with these four short calls being there S&P ended up closing a 5457 which is 322 points in the money And that contract had a value of 29 uh
• 52:00 - 52:30 291 um dollars per contract over here And on those multiply that by four then by 100 by the contract multiplier and his account is now down 100 grand because of that right because of four short calls at 5135 having expired 322 points in the money and him then getting assigned on that This is what that would have looked like So this is the example of the four
• 52:30 - 53:00 short calls at the um price that he originally traded them at the at the very start Okay as if they had not been closed down and then having expired This is where S&P closed on on the prior day And you can see that he's basically looking at $115,000 loss on that because he got got assigned on this The other thing to note is notice this is unlimited
• 53:00 - 53:30 risk to the downside So had SPX gone up through to here then his loss would have been $260,000 Okay and this is another big point of what Dale is um communicating in terms of you know an injustice or or what have you because remember he had a trade that kind of looked like this which is had fixed risk and then
• 53:30 - 54:00 based on what eventuated he's now looking at an unlimited risk trade in his account because of the trade bust before we looked at the P&L that he thought he had in his account So now after the trade bust let's have a look at what his account actually looked like And these two over here are exactly the same because this is the stuff that he did
• 54:00 - 54:30 manually So really the only thing that changes is this top over here So clearly he did not get filled for a buck 20 that got busted So what ended up happening was that he originally sold it for 591 He then got assigned at $291.90 and you then do the math of you know figuring out what the loss is by subtracting those two multiplying that by the number of contracts multiplying that by the contract multiplier and that gives him a loss over here of $114,000 on the four short calls You
• 54:30 - 55:00 then add it through to these guys But again these guys more or less almost net out So the the loss ends up being very close through to what we saw which is the same as what we saw back here right $1515,000 loss So that is exactly what ended up in his account And the broker is now saying uh you owe us 115 grand okay which he's got to pay And they'll they talk right
• 55:00 - 55:30 they don't ask they just take Now how is this likely to have happened in terms of the the A120 price uh getting filled okay there are multiple ways it could have happened but this is likely to have been the way that it that it happened So we're starting off in a point in time here where we've got the bid and the ask The bid uh and
• 55:30 - 56:00 the ask over here is you 17.4 by um 2050 And uh that gives us a mark price over here of $18.95 Now Dale then after he got his 10 call credit spreads uh filled he then puts in a limit order to close those 10 short calls at a buck 20 So since he's put in a limit order then his order gets put into the book Okay uh way over here There's now a bid
• 56:00 - 56:30 uh that he he's putting on for a buck 20 Now it's not the best bid The best bid is this one over here Okay and the best ask is this one over here So when you're looking at your option chain this is what you're going to see But if you could see the entire book you you would potentially see every other cheaper price that everybody's entered in through to the their platform which then ends up rolling up through to the
• 56:30 - 57:00 exchange essentially Okay So the book would show all of these other bids at at lower prices over here but the best bid over here is currently at 17.4 and that's what you would see normally in your platform but the order is there Now let's think of a um scenario where we've got another trader not Dale but another person and the other person is bullish on uh the market let's just say So they simply buy an out-ofthe money call long
• 57:00 - 57:30 call Okay so they buy a long call with the expectation the market's going to go up But uh let's pretend that they're also doing 02 DTE and they say well but I want to protect myself So in the instance that I'm wrong and spx comes down then I want to put on uh a stop or a trailing stop of some kind So in this case what we're going to imagine is a scenario that even though the current
• 57:30 - 58:00 mark over here was 1895 we've got a trader over there that wants to protect their long call by placing a stop or a trailing stop order linked to mark but a mark that is lower which basically means that SPX is coming down Okay so let's pretend that they set that at 14 And this is an example of how you would do that right so you basically go in you've already got a a long uh call there and you now put in a sell to close order at
• 58:00 - 58:30 a stop of 14 but linked to mark here All right All looks pretty normal Now what likely happened is that for a peri and this can be validated through the actual um uh the data feed I think I've got a screenshot later on that shows that But there was a a very brief period here of just 150
• 58:30 - 59:00 milliseconds where these bids over here basically disappeared So even though the market makers are normally there you know providing liquidity blah blah when things go crazy there can be small gaps Okay So for a period of 150 milliseconds here these bids basically went bye-bye They're gone So what happens next well remember there's potentially other things in here behind this particular
• 59:00 - 59:30 price In this instance it looks like they weren't And the only other one that was there was Dale's order So now what happens is that Dale's bid becomes the best bid And now the bid ask goes from a buck 20 all the way up through to 2050 Let's just say that you know this over here didn't didn't change But what's happened to the mark the mark is now at 10 bucks
• 59:30 - 60:00 85 which is just the midpoint between these two points over here But now since the mark has dropped down below 14 this now triggers that other trader's stop order And he's got a stop market order It could be a trailing stop or just a standard stop It doesn't matter but it's basically just a stop And but it was linked to Mark So now that the mark is less than his trigger level it now triggers a sell order at market for his
• 60:00 - 60:30 particular option So from this other trader's perspective if he wants to get filled at market for for a sale he's basically going to get filled on this one over here And that then ate up Dale's bid And that's how this could have likely eventuated this scenario where where his bid price of a buck 20 got hit
• 60:30 - 61:00 by having the trader on the other side over here hit that due to this kind of uh scenario over there Now let's look at this from both of those traders perspective Now from Dell's perspective Dell had this profit taking order at a buck 20 and the reality is that the real mark price should have been some somewhere around say 17 Okay But since the market maker bids disappeared for just 150
• 61:00 - 61:30 milliseconds this order ended up getting eaten up So from Dell's perspective is Dell happy well remember from Dale was in a scenario that he sold this originally for 591 and he can then buy it back for a buck 20 He's super happy He's made a profit of like $1,800 on that position What about the other guy though the other guy over here had purchased a long call at some
• 61:30 - 62:00 particular price uh over here and then he's being forced to have to sell that at a ridiculously low price Is that trader happy no They're furious Okay So that other trader got hurt badly whereas Dale's fill on this particular position helped them Dell is super happy with this ridiculous price It's a ridiculously cheap price that works against the trader on the other side of Dale whereas it worked for in
• 62:00 - 62:30 Dell's favor over here And this is going to be important when we look at rules Let's touch on this one So screenshot from one of the videos over here It's saying the busting of the short closing from SIBO changed his defined risk to unlimited risk But he's basically saying he put on a call credit spread that had a defined max risk over here Uh this commentary over here which is also what Dal is saying multiple times in multiple videos that due to the
• 62:30 - 63:00 bust from SIBO they essentially changed this risk profile to a risk profile that looks like this with an unlimited risk scenario Now is that true answer is no They did not do that It resulted in in that but only due to the fact that Dale had configured a profit- taking order just on his shorts
• 63:00 - 63:30 Had he put on a profit- taking order on the spread then I'll I'll prove this to you with a screenshot later on SIBO cannot bust an individual leg of a complex order that's been submitted as a single trade So if you submit a call credit spread they cannot just bust your short call and then say you know tough luck Therefore the morph from a call credit spread in through to essentially a short put sorry a short call type of risk profile which is unlimited upside risk was due to the fact that his order
• 63:30 - 64:00 to close out his trade was only on one leg So this concept over here is actually false This is another quote All right So time index over here 440 from the Theta Profits video different uh video Actually it's the same dude that you saw back there But anyway he said this is Dale speaking now He says "Had I kept my original position and this is my comment here Basically he's he's suggesting if he was not if he had not been busted okay if
• 64:00 - 64:30 that trade had not been busted then his max risk would have been $13,000 Is this true absolutely not Okay because that ignores the fact So yes he would have had a a $13,000 m max loss on the four call credit spreads but he he was trading 10 So this commentary over here ignores the fact that his six other call credit
• 64:30 - 65:00 spreads were pretty much already at max loss So his loss would have been much bigger Okay So um the reality is had he not been busted and essentially not done anything he would have had a loss of $32.6,000 not 13 Right so that's wrong too So uh I've shown you this already with uh six call credit spreads at um 12:30 p.m Central time over here Basically $16,000 loss But again this
• 65:00 - 65:30 assumes you could trade on the mid price then with some slippage you're basically going to be somewhere down here Uh if you were to try to manually close out that that particular spread but why close it out right you're already like $2,000 away from max risk Ideally you should really just leave that position on especially if you're looking at a risk graph It's obvious just by looking at it What if he had been notified of the trade bust prior to the close and this is the screenshot that you can see here where it's showing you this
• 65:30 - 66:00 particular code here it implies the um a trade bust being published onto the feed But then by looking at the milliseconds of the day you can then figure out what the actual time stamp was And that's approximately 34 minutes before the end of the trading session Now this could potentially be useful to to some degree to Dell in the sense that he's being informed of the trade bust the next day 5 minutes after the
• 66:00 - 66:30 open Whereas there's data in the feed to show that 34 minutes prior to the close of that same trading session on the Friday the feed showed the bust So the ideal situation would have been that SIBO informs Schwab as soon as this is official which basically is 34 minutes prior to the close and then Schwab informs
• 66:30 - 67:00 Dale one or two minutes after that via email via voicemail by by some means Okay so this is potentially useful from that particular purpose if you want to try and uh you know escalate the issue and say look there's proof that 34 minutes prior to the close of that same trading day the feed showed the actual trade bust So why the hell wasn't I informed at that point in time but let's look at that Let's
• 67:00 - 67:30 pretend that that exact situation happened and that We'll now go through to 30 minutes Let's assume that it takes one or two minutes for each of those communications to happen right from SIBO to Schwab and then one or two minutes from Schwab through to the customer So let's say that Dell can now hop back on 30 minutes prior to the close and see how that would have looked like Now these two things down here are exactly the same as before because he
• 67:30 - 68:00 manually did these changes right all we really care about over here is the trade bust So from a trade bus perspective he originally sold the call for for 591 Then at half an hour prior through to market closing for S&P the mid price over here and I'm going to be nice and and select the mid price instead of assuming any kind of slippage Okay so the the mid price over here was
• 68:00 - 68:30 284 You then do the math four contracts over here Originally sold off for $591 then bought back for $2.84 Contract multiplier $111,000 loss Okay Overall his loss was 112 over here So what's the difference between those two so his position as happened which means you know getting informed at 5 minutes after the open the next day being informed of the fact that his four short calls got assigned from the pride
• 68:30 - 69:00 deck cuz that expired because it was a zero DTE trade He was down essentially $15 $15,000 which is the reality that he suffered right he he he lost that amount of money Had he been informed promptly or even more promptly let's just say he could hop back in through the market 30 minutes prior through to the market closing on the same trading day he would have been down almost the same amount of money Okay So would it have been ideal
• 69:00 - 69:30 for him to have been notified sure the quicker the better I think we can all agree on that But the reality is that even if he was he would have been down the same amount of money So in his case it would not have made an ounce of difference between the two had he been informed more promptly than what he was So let's have a look at specific um screenshots from the official PDFs that they put out So this is the the concept
• 69:30 - 70:00 of you know if you trade a complex order as a single trade such as say a call credit spread where you're putting it on as a call credit spread can the SIBO bust just one of the legs and you can see from here it basically says if any leg of a complex order is nullified the entire transaction is nullified So if you put on a call credit spread can they bust a call credit spread yes but they bust the entire call credit spread They cannot bust just the
• 70:00 - 70:30 short or just the long of a call credit spread If you're trading uh you know some kind of broken wing fly and you've entered the order as a broken wing fly can they bust just this little short over here no They could bust the entire thing sure but not one of the legs What if you're doing something like a uh you know you've got a a broken wing over here and then you've got a you know calendar or diagonal above the money The market is currently
• 70:30 - 71:00 here Can they bust an individual egg no But when you're putting on this trade you put on this trade with two orders You did the broken wing fly first and then as a separate order you did your calendar or diagonal So they can bust an order a complex order they can't bust an individual leg of a complex order So even though they can't bust the individual uh short or long of any one of these particular orders over here they can bust the entire complex order
• 71:00 - 71:30 You might be thinking of this as well this is my trade My trade is a combination of these two things But what you've got to understand is that you're you're putting on this position in two trades And you need to understand that a complex trade entered as a single trade can be busted but not an individual leg of a complex trade Right so and this again is proof which goes against the uh claim being
• 71:30 - 72:00 made by uh by Dell and by some of the people doing the reviews saying you know how dare the SIBO do such a shocking thing which is to cancel or bust the leg of a fixed risk trade and convert that into an unlimited risk trade They did not do that What they busted was his individual order to close out the shorts which he manually entered Had he placed an order to close
• 72:00 - 72:30 out the call credit spread as a spread worst case scenario they would have busted the spread and he would have had four of these call credit spreads come back to life where each one of these four call credit spreads would have had a $3,200 max risk but also risk defined Yeah And this is basically going to that So what if the four core credit spreads had been busted So I'm just splitting out the 10 core credit spreads over here into you know chunks So in the instance that four of these core credit
• 72:30 - 73:00 spreads these this is the profit taking order right but if he had placed this profit taking order as a spread then these guys basically come back to life And just as I mentioned each one of these spreads has a max risk here of $ 3260 each which is a total of $13,000 max risk These six call credit spreads over here have a max risk of 19.5 And as we saw at the start the 10 core credit spreads have a max risk of 32.6K which
• 73:00 - 73:30 seem he seems to have been willing to take that risk when he put on that trade But again the key is had he exited as a call credit spread they could have busted that call credit spread but uh not an individual leg of the call credit spread converting it from fixed risk in through to unlimited risk Now can can Dale request a trade bust had he noticed in time for example that is one question The other the other
• 73:30 - 74:00 thing that you see Dale mentioning um specifically in the videos is that he says the other person on the other side of the trade was more powerful than me had more money They probably were members of SIBO and all that kind of stuff And so therefore SIBO decided to give that particular trader uh the bust instead of giving it to me How unfair How unjust Well let's look at the rules here When we look at the erroneous buy or sell and how that particular thing
• 74:00 - 74:30 works you could see over here based on a screenshot from their PDF an erroneous sell remember this is for the the guy at the other side of uh Dell's trade Um so for an erroneous sell is if the price received for the person selling over here is erroneously low And in the case of an erroneous buy it's if the person purchasing is purchasing erroneously high So in other words what that means is what I've said here So if you're a
• 74:30 - 75:00 buyer if you're going to then because of a mistake have to pay a crazy high expensive price you're being hurt You're not paying a fair price You're paying a ridiculously expensive price as a buyer On the flip side if you're a seller then if you are essentially forced into a transaction where you're getting an unfairly cheap low price for that then you're being hurt Now from Dal's
• 75:00 - 75:30 perspective he's actually on the other side of that because he's a buyer Remember he was looking to buy to close his short calls So he's essentially a buyer Was he paying a crazy high expensive price no he was paying a ridiculously low price of a buck 20 What about the person on the other side of that trade the other the person on the other side of the trade was a seller of that call and from their perspective they did have a ridiculously low cheap
• 75:30 - 76:00 price that was very unfair at just a buck 20 The fair price for that was like $17 plus and yet they had to eat a buck 20 which is unfair So the other guy got hurt not Dale Dell benefited from this So the reality then is that the trade bust could only have been placed by the other guy not by Dale Okay The rules say that even if Dell tried to
• 76:00 - 76:30 submit for a trade bus he would have it would have been declined Okay he's not the one that's being hurt He's the one that's benefiting from this So it's got nothing to do with oh the other guy was more powerful Oh the other guy it's you know Sibo is just you know meandering and pandering to their friends and all this kind of stuff No they're just following the rules Dell was not hurt by this By the way I should clarify that Dell was not hurt by the bust of this particular
• 76:30 - 77:00 transaction He was hurt by the net effect that that caused the the the domino effect of the fact that he then manually closed out all of his other positions and then he was left with those four short calls and therefore he was hurt because he was unaware of of this thing happening I get that he was hurt for sure Okay But with this specific transaction of four long calls over here from Dal's perspective or from the other side of the trade four calls being sold
• 77:00 - 77:30 by the other guy It was the other guy that was hurt by this transaction not Dale So these rules are there to protect the person getting hurt And it was the other guy not Dale had Dell realized that he was getting a crazy good fill at a buck 20 for something that made no sense cuz remember that option should have been somewhere priced between 17 and like $100 okay depending on what
• 77:30 - 78:00 minute or whatever you were actually checking the the actual chain he should have called the broker and said "Look this looks totally wrong." and then the broker at that point would have gotten involved and then the trade would have been busted But the the the point is that it's being busted in order to protect the guy on the other side of the trade But at least DA would have at that particular position been informed or have had a little bit more information to do something about it Even though like I've shown already he was already
• 78:00 - 78:30 pretty much at almost at max loss anyway So there's pretty much nothing he could have done even had he known before the fact just because he was trading zero DTE and there's no time to do anything The whole point here is that the rules are there to protect the person being hurt And in this case Dell was the one that was benefiting from this price and it was the other guy that could be the only one to validly log a bust because
• 78:30 - 79:00 he was being hurt getting into some a little bit of the the technical stuff over here But in terms of the theoretical price uh SIBO is always going to calculate the theoretical price in order to then figure out let's just call that you know what is the current fair pricing and from there in order to look for potential trade bus They they then have buffers price targets essentially that go from the theoretical price through to
• 79:00 - 79:30 anything that goes beyond that particular buffer one way or the other That's how they then know if it's going to be an erroneous trade Okay Now uh you can see here they're basically saying the the best bid over here just prior to the transaction in question with respect to an erroneous sell transaction is what is going to be chosen as the theoretical price Now remember we're now looking at this from the person requesting the trade bust which is the guy that's on the other side of the trade from Dell
• 79:30 - 80:00 who's a guy who's essentially selling that call And this is the trade that was eventually busted So if we then look at the best bid just prior to the uh the bus we can see that it was 17.9 the best bid So that becomes the theoretical price that they're going to be working with And then from there there are two types of um errors One of them is called obvious and one of them is called catastrophic So the obvious errors there's a sliding scale over here that
• 80:00 - 80:30 says from the theoretical price what is the the minimum distance one way or the other that it can uh go before we will call this thing an obvious error So in this case if we go with a price of roughly about $17 over here it's saying that it would have been classified as as an obvious error with a move more than uh 0.8 from the theoretical price And for an obvious error bust to be logged you've got to file this with the exchange within 30
• 80:30 - 81:00 minutes of the execution Okay so you get what you think is a bad fill If it's beyond these kinds of limits for whatever price of the option you're u originally trading remember the theoretical price the the Fed price right prior through to the the weird one Then um at that point you've got to log it within 30 minutes if you want that busted uh with the exchange And then you've got catastrophic errors And catastrophic errors basically just means that the the buffer over here is going
• 81:00 - 81:30 to be quite a bit bigger than the buffer we saw before And again if we look at 17 here with the option the actual theoretical price for the seller if it's more than two points away in this case if it's less than $15 uh then it would be classified as catastrophic In this case it was a$120 So um it definitely would have been classified as a catastrophic error If you're inside regular trading hours over here you can see that it says
• 81:30 - 82:00 notification must be received by the exchange by 8:30 a.m on the first trading day following the execution So that's not 30 minutes that you could literally go through to the end of the trading day and then overnight and then as long as you log it before 8:30 a.m the next trading day it could be busted at that point Then if it's in global trading hours just think of that just as you know extended trading hours there Notification must be received within 2 hours of the close of
• 82:00 - 82:30 that global hour session And in our case this is the one that's most relevant And it says for transactions in an expiring options series that take place on expiration day This is a zero DTE trade So therefore it matches this The party must notify the exchange within 45 minutes after the close of the regular trading hour session on that same day Okay So what this is saying is that your trade if you're trading 0 DTE your
• 82:30 - 83:00 trade can be busted 45 minutes after the close of the regular trading session which is not ideal right because the option has already expired There's nothing you can absolutely do whatsoever And then uh you know say 30 minutes after the the regular session closes you you you're then informed oh by the way this thing was busted Now time limit for a trader requesting a trade bust We've already seen that there was a 30 minute um thing but this is just extra confirmation here
• 83:00 - 83:30 Uh within 30 minutes of the execution you have to uh file that This is from the exchange rule book that you can get there page 410 And then if you then even check on the Schwab um documentation over here you can see they pretty much say the same thing in terms of 30 minutes here from the execution time is uh where your time limit as a trader to request a trade bust Now let's flip that and look at
• 83:30 - 84:00 that from the other perspective So now once a trade bust has occurred remember the trade bust happens by the exchange not by the broker right you you as a trader you inform the broker You don't have the ability to talk to the exchange You inform the broker and the broker informs the exchange and then on the way back once the trade has been busted SIBO does not talk to you directly They talk to the broker So the first thing is understanding what is the the time limit of the notification going from SIBO to
• 84:00 - 84:30 Schwab in this particular case Well all the documentation says is that the exchange SIBO shall promptly notify both parties to the trade electronically or via phone There is nothing in the documentation that says anything more specific than that So therefore it is subjective So prompt to you may not be prompt to them Prompt to them might be hey next day should be fine and they they can consider that prompt Right now
• 84:30 - 85:00 in the case of Dale Dale's own commentary has said that when he received the voicemail from Schwab the next day Schwab said in the voicemail that Sibo had notified them the prior night and then uh the the broker Schwab then informed Dale 5 minutes after the open the next trading day So that's interesting right the fact that there is nothing beyond them just saying promptly whatever the hell that means So they they have flexibility
• 85:00 - 85:30 there in case anybody tries to sue them or anything like that I guess Yeah So this commentary here is basically just saying that um there was really nothing he can do had he been notified even 30 minutes prior to the close as we've seen We've already seen the math The loss would have been almost identical in Dell's case Okay So can he complain or try to sue or something like that saying "Hey you know you guys should have notified me roughly 34 to 30 minutes on
• 85:30 - 86:00 the same day since it was the bust had already been published onto the feed." So can he try to you know pursue uh Schwab or or Sibo maybe The problem then is that when they then look at the data that they they then get to see that even had they notified him even more promptly the damage was already done in his positions Okay So there would have been no benefit cuz he would have had pretty much the same loss So therefore I don't think he's got much viability in pursuing that at
• 86:00 - 86:30 all All right But even with the notifications that happened here where where uh SIBO informed Schwab overnight whatever overnight means they can consider that to be prompt and therefore they're completely within guidelines Uh and then for for Schwab to then have you know their staff come in at whatever the time they come in in the morning which I assume is you just prior to the open uh
• 86:30 - 87:00 and then inform Dale 5 minutes after the open That seems reasonable too in terms of promptness if you like from from the broker through to through to the actual trader Okay So basically I don't see any issue necessarily with with the bust itself There was no issue with the notification from SIBO to Schwab No real issue from Schwab through to Dell even though that could be improved for sure Rumors are that with uh Interactive
• 87:00 - 87:30 Brokers their notifications are more prompt than what you find with Rob So that can be improved but you know unfortunately in Dell's case we get back through the point that even if he had been notified it would have made no change to his his P&L So getting back through to Dale's uh commentary here his exact quotes I've logged the reference if you want to see it for yourself He's basically saying SIBO's busted trade rules especially rule 6.25 By the way there is no rule 6.25 There is a 6.2 So that's just a
• 87:30 - 88:00 misspoken thing Anyway um if uh SIBO's busted trade rules were created to protect market participants from clear errors like finger trades or trades occurring at prices far from the market All right So now you know exactly how this is qualified So first of all you now know how to uh look at the theoretical price You now know uh the difference between an obvious error versus a catastrophic error You can look
• 88:00 - 88:30 at the table to to see what the actual gap or what the distance is between those two uh and you know the exact way that you got to proceed in how much time 30 minutes that you need to log that particular trade bust Okay And then also how the notification comes back through to you But that is qualified It's not just you know saying it's got to be far right you need to be specific and also remember it requires that the uh that
• 88:30 - 89:00 you're being hurt by that transaction because remember in Dell's case he was he was benefiting from this So the bust is not going to work from his perspective Okay the seller is the one that is being hurt So the idea was prevent investors from being unfairly harmed by outlier trades that never should have happened True that part Um but here's a problem When SIBO applies the rules to bust a limit order that was filled
• 89:00 - 89:30 correctly it can unintentionally harm the investor it's supposed to protect especially when the trade is part of a multileg defined risk strategy This is the part that again he keeps talking about and is incorrect SA cannot bust an individual leg of a complex trade That was his own doing in submitting an order to close out just the shorts of a call credit spread In these cases cancelling just one leg of a filled spread exposes the
• 89:30 - 90:00 trader to unlimited risk Risk they should they never consented to Again false right had he uh had an order to close the call credit spread they could have busted the call credit spread but not bust an individual leg of a trade and therefore turn a fixed risk trade into an unlimited risk trade That is wrong More comments here Um I placed a multi-legg option trade with defined risk You can see the you know where he's
• 90:00 - 90:30 going Um my order filled I saw it in my account I made decisions based on the field Hours later without warning the exchange erased part of that trade No Leaving me exposed to massive risk I never agreed to Wrong again Um then they waited to tell me about it until the next day after I could do nothing about it Also wrong They did wait until the next day which is within normal boundaries of their notification criteria based on the rules both from SIBO to Schwab and Schwab
• 90:30 - 91:00 through to him And on top of that as I've already mentioned multiple times even had they notified him 30 minutes prior to the close his P&L would have been the same Still the same amount of loss I didn't make an error he made multiple errors So that's wrong Uh I follow the rules No he didn't understand the rules Uh but now I'm paying the price because the system meant to protect me failed to understand its own ripple effects Also wrong He was the one that didn't really understand how things worked I think the person on the other side of
• 91:00 - 91:30 this trade was more powerful than I was We've talked about this That's incorrect It's simply a matter of the fact that he wasn't the one that was being hurt by that wrong price of a buck 20 The other guy was and therefore that other guy can submit the bust not him I've contacted my broker Schwab They're currently evaluating my case and I'm hopeful that we'll reach some resolution So far I've heard mostly it's not our fault the SIBO busted your trade and we were told sorry and we told you as soon as we found found out that seems
• 91:30 - 92:00 to be accurate uh which was by the way the day after I hit the ground from the parachute jump again he's complaining he was notified late in other words it was too late to prevent any of the destruction wrong because had he been notified 30 minutes prior to the close it would have been the same loss pretty much this is unfair and injustice has been done to me no he just didn't understand the rules all right summary the mistakes Uh key taking a profit taking order on an
• 92:00 - 92:30 individual leg rather than at the spread level This was really the first domino that the other stuff followed on to damage his account That was done by him not by um not by uh by Sibo Uh his trade plan over here was again to take profits on half of his spreads at 50% of the max credit Yet he placed an order to close all 10 shorts at a price of the spread and not the individual leg And you know that is kind of related
• 92:30 - 93:00 through to the first thing that that we talked about before The the fact that he had this order on a single leg that is what then caused the trade bust to in his instance give him what he thought was the conversion from from fixed risk to unlimited risk But it was really not uh as we've talked about that's I already talked about the rest there Okay Uh mistakes number two either he was not monitoring the risk graph of
• 93:00 - 93:30 of eyeballing this which clearly shows that he's at a big loss and also shows that the actual price over here was much much much higher than a buck 20 So either he's not even looking at this and not looking at this which in itself is kind of crazy right to not be using very valuable information over here that can visually tell you u what's going on And he remains unaware that there's any issue whatsoever until the next day which is what he claims right he in his
• 93:30 - 94:00 videos he says "I didn't know anything was wrong you know until the the very very next day." Okay Um so either that or he was looking at both and even though he realizes he's taking a loss he then says "Oh jeez I better shut down the entire position now." And gosh darn I'm so lucky that I I got four contracts filled here at a buck 20 for a profit instead of a really big loss Lucky
• 94:00 - 94:30 me That's an issue too because again ideally he should have contacted the broker at that point and said "Look this is crazy." Even though he realizes he can't bust the trade he's at least letting the broker know and then the broker can submit the bust on behalf of the person that is being hurt which is the guy on the other side of Dell's trade so that the trade ends up getting busted anyway But remember Dell does not have the right to bust it Okay the bust is to protect the person being hurt which is the other guy
• 94:30 - 95:00 And third then he's going in there And remember after he got the partial fill for the crazy price he manually put in an order to close the six calls at the same strike for 153 bucks 50 How can this not scream to you something's wrong anyway so it's either that he didn't notice which is kind of concerning in itself or the likely scenario I think is that um he said
• 95:00 - 95:30 "Sweet awesome." You know um he did realize that it was at a crazy price but it's in his benefit So happy days M4 over here again the six remaining call reds after the partial fill It was crazy for him to remember just by looking at a risk graph you can see that you're already pretty much at max loss So there's no point closing them out in the first place You know that by by closing it out you're really
• 95:30 - 96:00 just going to be closing it at max loss anyway So there's at least a chance that the market can kind of come back down and uh maybe uh your losses could be uh reduced or or even nullified uh if you're lucky But at worst you know that that 32.6K loss that you jumped into at trade creation with open eyes knowing that that was your max risk that that is going to be your max risk instead of $115,000 But by then making things
• 96:00 - 96:30 worse and then legging out of those six core credit spreads he then doubled the loss that he ended up taking on those six remaining core credit spreads doubled it Okay so that was another big mistake there Last one here Uh when the prior day VIX closes at 52.3 markets wild bid spreads are crazy If you want to snort cocaine and then go
• 96:30 - 97:00 you know walk on a walk on a on a tight rope with sharkinfested waters underneath you good luck Know what you're doing You got to watch this thing like a hawk when you're trading zero DTE So you know if you want to play in that you know high stakes high energy eyeballs glued to the screen world do it But just know that you you're you're taking significant risk doing that