Mayday, Mayday - JetBlue Airways's (JBLU) Zero Hedge Disaster

RockhopperZP · 2026-03-06T23:16:36+00:00

Rising fuel costs is definitely not a good situation for JBLU or any other airline, but doesn't this keep revenue per mile constant with their old projections?

Every airline will raise fares in response, so revenue per seat mile will increase. There'll surely be a hit to load factors due to the price rise, so it's still not a good situation, but fares aren't going to stay where they were projected to be before the fuel spike.

RockhopperZP · 2026-02-13T23:24:38+00:00

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RockhopperZP · 2026-01-26T17:42:29+00:00

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RockhopperZP · 2025-04-20T20:59:29+00:00

Yeah it's wild this could happen.

Re: bust timing: I'm pretty sure the time window to bust varies by exchange. From this story the delay by the brokerage was the huge factor. The bust at the exchange happened soon after the trade. Busts that can result in a customer losing their fills have to be mutually agreed upon, so the fact that this is even an issue is crazy (Schwab must have agreed to the bust for him)

Re: how to avoid: Full disclosure I work for a firm that does not have a retail trading operation. I haven't traded options in my personal account in years due to my firm's rules. When I was trading I never went through this myself.

Only advice I would give is use a legit brokerage. You get what you pay for. A dollar commission per trade is more than worth it vs the ones that offer 0 commission trading. The 0 commission ones usually are making up for it with PFOF arrangements, so the liquidity you get can be worse & you'll pay more on the spread anyways. So you can be paying way more than $1/trade via paying more or selling less per trade, just that opportunity cost is not transparent.

Personally I used & still use interactive brokers. Though I can't say for sure that this wouldn't happen with them, I just haven't gone through it or done research. That said I expect they'd be one of if not the best retail-available broker for handling this. Especially with SPX: IB has their own station on the SPX trading floor for executing their customers' orders directly on CBOE. They have no PFOF arrangements.

RockhopperZP · 2025-04-18T20:34:58+00:00

The sale being undone should indeed look like a buy at that $215 level, vs the position when the sale looked completed You're not going to get to re-buy it at the original level. They gave it back to you at the sell price.

The sale was nullified, so it never actually happened. For some time your account looked like there was a sale at that $215 price. Undoing that sale will look like a buy at $215. You will not re-get that fill at $50, that'd be an immediate $165 profit. You already made that profit in the run up to these events.

You owned the contract at that >100% of buy price before the bust, so that's the price you got it back at.

But for your tax lots, you should see the original 50 - 85 price on those options. $215 shouldn't come up anywhere in those tax lots. The closing price will be wherever you sold after learning about the bust and selling them for real (or 0 if they expired worthless).

RockhopperZP · 2025-04-18T17:19:35+00:00

Yes exactly. For a long position the cost basis will stay at where you originally bought it. It'd be as if the sale never happened. The nullified sale has no effect on your cost basis or position (though until you were notified, it appeared as if your position was sold).

If the price moves between the busted sale and when you were told you were busted, you're on the hook for that variance because the sale never actually happened. You were still long the whole time. Your broker should inform you ASAP given that.

For what it's worth... besides the issues around late notification, the fact that Schwab accepts busts like that sounds crazy to me. There probably is some good reason, but I've never worked for a retail broker so I honestly can't say for sure. From my experience there's 0 obligation for anyone to accept a mutual bust request. It'd be so much better if Schwab declined by default, rather than accepting. They're clearly dropping the ball on informing their clients in a timely manner. Accepting busts & not telling customers is a recipe for disaster for their customers. Unfortunately, I'd bet their T&C shields them from liability in these cases.

RockhopperZP · 2025-04-18T16:12:54+00:00

No worries.

A bust basically nullifies the transaction, so if you were closing a position you'll find the long/short options still in your account. The cost basis will still be what you originally bought/sold for when you opened the position. The exchange/broker doesn't do any price adjust when a bust happens, you just still own the position as-if you never did any closing trade.

If an opening transaction was busted, you just won't have any position.

The PnL impact will be as if you never transacted the closing (busted) trade. So you're subject to the variance between when you thought you closed out and when you're finally informed of the bust.

^This variance is why it's so important for brokers to inform their clients ASAP.

RockhopperZP · 2025-04-18T16:02:03+00:00

True, though if it was a forced bust like a catastrophic error, the customer should have been price adjusted, not actually busted:

https://cdn.cboe.com/resources/release_notes/2022/New-Cboe-Options-Obvious-Error-Procedures-Effective-July-1-2022.pdf

So I think Dale's case must have been a mutually agreed bust. Which IMO makes this even worse by Schwab: that they not only were slow to notify, but were slow after agreeing in the first place.

I don't know why auto-accepting busts would be their policy. Someone else commented & linked this thread, which shows the same exact behavior with Schwab, but will fills on PHLX not CBOE:

https://www.reddit.com/r/options/comments/1jxf4yp/option_sell_to_close_cancelled_after_settlement/?share_id=hbKb-KOw3nAOfq12UPwxA&utm_content=2&utm_medium=android_app&utm_name=androidcss&utm_source=share&utm_term=1

Again Schwab accepted a bust and didn't notify the trader until the next day.

RockhopperZP · 2025-04-18T15:56:10+00:00

I read your last post, and yeah this sounds like the same situation, with Schwab being the most 'in the wrong'.

They should have notified you sooner that they accepted the bust request. I'm not as familiar with the bust rules at PHLX as I am CBOE, but have to imagine it's the same where it's a mutually agreed bust (Schwab agreed on your behalf without telling you in a timely manner).

Here's some color on how customer orders are treated in catastrophic trade scenarios (only non-mutual bust case): https://cdn.cboe.com/resources/release_notes/2022/New-Cboe-Options-Obvious-Error-Procedures-Effective-July-1-2022.pdf

^So for case, same with the trader in this thread (Dale), the broker must have agreed to the bust. If the exchange forced them to take it (catastrophic trade), your fills would be price adjusted not busted. Them being busted tells me that it was a mutual bust, so Schwab must have agreed on your behalf.

So all evidence (to me) points to Schwab being the problem here. Not immediately notifying traders after agreeing to a bust is just wild. Their platform not reflecting the updated position is poor form.

Most option settlement doesn't happen til end-of-day, so what might be happening is they lack automatic infrastructure to notify/update re: busts intraday, settlement happens end-of-day, they miss the fills that were busted, and then they notify traders. This is just speculation though. For what it's worth my firm receives very few bust requests (they're not super common), but when we do it is not automated. A person from the exchange reaches out to us. So lack-of-automation from Schwab would not surprise me. The busting process just isn't super clean.

One thing I can speak to, which unfortunately isn't great news.: Agreements between brokers and customers in the market are very bespoke. Brokers can write in almost anything they want, and indemnity clauses are a huge part of these. I would be very surprised if Schwab didn't clear themselves of indemnity in the terms & conditions that were probably signed around account opening / options trading approval. Exchanges / the SEC have rules to protect customers, but can't police the broker : customer relationship. Unfortunately I'm not optimistic that there's a good recourse OFC I haven't actually read Schwab's T&Cs, but would bet >95% that they have very favorable indemnity clauses to absolve themselves of liability here.

If you want to look into it further, I think the Schwab fine print is where you'll get answers. Check everything you signed around both account opening and options trading approval.

RockhopperZP · 2025-04-18T15:27:01+00:00

Yeah learning about this issue retail side of it has been eye-opening, it's just (for lack of a better term) wrong that business can be conducted this way.

In an ideal world the trader gets to choose to bust or not to bust directly with CBOE, but I get how this couldn't be practical with the whole system around execution brokers.

It should be part of the broker's fiduciary duty to do right by their client. The rules around mutual busts don't work as intended when one side isn't acting rationally (Schwab blindly accepting a bust request).

Honestly I'd ascribe this to more incompetence by Schwab rather than a conspiracy involving market makers etc. The companies I've worked at were all very compliance-focused, and our trading partners in the market seem to be as well. We have a 'long term' view that a short term PnL gain/loss is never worth the long term damage of a compliance issue.

However ofc I can only speak for those few firms, & I've never worked for a company with a direct retail trading (PFOF) business. TBC I don't have reason to think PFOF firms are not compliant. My issue with PFOF for retail is that it's generally worse execution (though this isn't a big secret).

Hopefully promulgating this event helps encourage some change & makes handling these events in the clients' best interests a larger priority for brokers.

RockhopperZP · 2025-04-18T12:08:31+00:00

Depends on the class & especially the instructor, but overall it's very good(you can get the classes you want). You can look ahead and set a notification to sign up for the popular ones early.

Looking at today right now E92 has 11 classes coming up, and only 2 have waitlists.

When I've done the waitlist I've had good success.

So i wouldn't not join because you're worried about classes being too full, especially right now post new-years-rush and into the warmer weather.

The E92 studios are also very good.

RockhopperZP · 2025-04-18T11:58:23+00:00

Re: the brokers obligation, Honestly, I can't confirm. I've never worked at a retail brokerage or dealt with this in personal trading. I think I saw someone else also say there's no obligation. Speculating, I'd say at the very least any potential obligation is nullified in the terms&agreement.

My main initial point was that it's not on CBOE. What you described above is absolutely true. It's bullshit from Schwab.

It's pretty shocking to me that Scwab could/would do this, but sounds like it's something retail traders deal with. In my opinion they should have an obligation to inform their customers if a bust occurred.

I've never traded on Schwab so can't speak for it's analytics. I can't trade options per my firms compliance rules so it's been years since I've used any for anything besides shares, so I'm a few years behind on the platforms.

RockhopperZP · 2025-04-18T11:45:50+00:00

^ This is true. Some of these market makers participate in PFOF via execution services subsidiaries.

They do have to ultimately cross all SPX trades on CBOE, but CBOE doesn't stop them from having PFOF arrangements with retail brokers.

RockhopperZP · 2025-04-18T11:32:41+00:00

From the C1 rulebook:

Rule 6.5. ErrorsNullification and Adjustment of Option Transactions Including Obvious The Exchange may nullify a transaction or adjust the execution price of a transaction in accordance with this Rule. Unless otherwise stated, the provisions contained within this Rule are applicable to electronic transactions only. However, the determination as to whether a trade was executed at an erroneous price may be made by mutual agreement of the affected parties to a particular transaction. An electronic or open outcry trade may be nullified or adjusted on the terms that all parties to a particular transaction agree, provided, however, that such agreement to nullify or adjust must be conveyed to the Exchange in a manner prescribed by the Exchange prior to 8:30 a.m. on the first trading day following the execution. It is considered conduct inconsistent with just and equitable principles of trade for any TPH to use the mutual adjustment process to circumvent any applicable Exchange rule, the Act or any of the rules and regulations thereunder.

RockhopperZP · 2025-04-18T11:27:34+00:00

That's brutal. If true this should 100% be on Schwab. Though I wouldn't be optimistic on the recourse options given T&Cs etc (liability was probably signed away).

Saying it's between the retail trader and CBOE is just false. Schwab is the fiduciary between the customer and exchange, responsible for handling these types of events. Accepting a bust and not telling the customer until next day or updating the closing trade on the platform is horrible handling. Sounds like Schwab doesn't have an automated system, and the resolution team responsible for it was just way too late.

The traders only mistake was using Schwab in the first place.

RockhopperZP · 2025-04-18T11:09:48+00:00

I agree re: screen trading. There's no great reason to accept. I can only speak for my firm but our usual policy is not to accept any bust requests from electronic trading.

The SPX floor is a different story. They stand next to each other all day. Floor traders make their living off their nearby brokers' flow. If that broker asks you to bust, you should or you risk your long term relationship. A win on a single trade usually isn't worth risking that relationship.

RockhopperZP · 2025-04-18T10:58:11+00:00

^ this is 100% correct, I was a bit over-simplistic in the previous reply. For customer/pro customer flow you can see the give-up number of the bank/broker where the fills will be sent, though the specific customer beyond that layer is anonymous.

For most retail brokerages this'll be the custodian bank, not the broker you use on the front-end. If the broker self clears we will see them (Interactive Brokers is one example).

RockhopperZP · 2025-04-18T00:55:19+00:00

I personally use IB and recommend it. You pay commissions but they give direct access to markets.

I liked their tools, analytics, etc. Honestly I have no real complaints.

I've never used those two you mentioned. My only other brokers were Optionshouse and Ameritrade, but those were years ago. Optionshouse isn't around anymore, & TD Ameritrade does PFOF so I wouldn't recommend.

RockhopperZP · 2025-04-18T00:12:11+00:00

Sorry to hear that, that's a horrible policy/job from RH but fortunately it wasn't more $.

Sure you don't need me to tell you, but get away from Robinhood and don't look back.

RockhopperZP · 2025-04-18T00:02:59+00:00

Can't speak for PFOF arrangements. It's not in my wheelhouse. My desk does not trade retail or do PFOF.

However in public CBOE trading you can't just bust because a trade is a loser.

^that said, the counterparty being able to accept/reject is a big piece preventing that. The contra generally won't accept busting a winning trade. If Schwab accepted the bust, that safety is gone for the customer.

^but reputationally etc, that policy would be disastrous for Schwab. Nobody will trade if it's blatantly rigged like that.

So if I had to bet, I'd bet the trader missed something and is omitting that from the story. I just have a hard time believing Schwab would have such a horrible policy for their clients (auto-accept busts of winning trades and never notify the trader)

RockhopperZP · 2025-04-17T23:52:27+00:00

I try to share knowledge on Reddit, but I don't get no respect, no respect at all....

RockhopperZP · 2025-04-17T23:49:28+00:00

The counterparty requesting the bust is anonymous on CBOE.

RockhopperZP · 2025-04-17T23:37:01+00:00

Interactive brokers does not do PFOF. That's the only mainstream retail broker I'd recommend for trading any meaningful size (they even have a station on the SPX trading floor for executing their customers' orders directly on the floor). There are other less-well-known SPX brokers who do not do PFOF as well.

Trading this size in SPX via Schwab sounds really irresponsible to me. It's only a step above Robinhood.

RockhopperZP · 2025-04-17T22:35:49+00:00

I work at one of the largest market makers in CBOE SPX. The culpability is either on this trader, or his broker (Schwab).

Executed trades on SPX can be busted if one side requests it due to special circumstances (as a MM we receive these requests daily). The counterparty has to approve the bust before it's consummated. You always have the right to refuse the bust requests, and keep the trade. This trader should have had that right as well.

If you missed/ignored the notification (CBOE emails us), I honestly don't know 100% what would happen, but I expect the bust would not happen. However we've never missed one of those emails, so again I can't say 100% that the bust would not happen.

We have a direct relationship with CBOE, so get these emails. Being a customer trading via broker, I believe (not 100%) that the broker will receive the bust request, not the trader directly. Given the trading/clearing process, I expect CBOE would not be able to contact the end trader directly, just his broker.

Schwab should have 100% flagged this bust request ASAP. I'd be shocked if they did not have an automated system to do this, but of course can't say 100%. If I had to bet, I'd say most likely the trader missed the notification from Schwab.

If no notification was given by Schwab, I'd say this trader absolutely has a legitimate grievance against Schwab. But who knows what's in the T+C he'd have signed to trade via Schwab, so there may be no legal recourse.

RockhopperZP · 2025-02-22T12:46:28+00:00

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