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Robinhood raises $323M at a $7.6B valuation

reuters.com

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Re: Robinhood raises $323M at a $7.6B valuation

#121

Post by notyourday »

moose314 wrote: post #87
notyourday wrote: post #78

Earlier quoted context omitted.

This is not 1994. Catching a market order with volume is winning a Power Ball. It will be a limit and if it is not IOC/FOK order, should it clear top of the book and not be filled it would simply become a new national best.

Its not really clear who you are arguing against, the GP mentioned large market orders, I simply made the point that most brokers have worse order routing than the HFT firms and Robinhood is probably not much worse than anything else out there. Using limit IOC orders is a tool that more savvy retail traders can use to prevent bad execution, but if they are trading size the commission they pay to the broker won't make…

GP is confused. The market orders from retail investors are measured in hundreds to thousand share, mostly 100s rather than 1000, with 100x100 or 200x200 being a typical live quote on a 1000x1000 As soon as the retail investor starts throwing more than 1k orders they become limits.

All the talk about RH being a bogey man with it selling order flow is b.s. peddled by those who either suck the teat of the retail investors directly or those that live off the spoils from those that such those teats. Wall St is terrified that tech is coming to eat its margins -- that's why we get all this.

P.S. I'm not a fan of RH at all - 99% of the people who use it should buy an ETF with a 0.01-0.03% expense ratio and be done but if a random college jock that does not have a PhD in math can make $200k/year first year out of college in a Wall St firm, Wall St needs to get a haircut.

Re: Robinhood raises $323M at a $7.6B valuation

#122

Post by MuffinFlavored »

elamje wrote: post #85
MuffinFlavored wrote: post #62

Earlier quoted context omitted.

I'm confident that everyone's IRA would be better kept in a low-cost mutual fund that tracks a popular index.

That’s exactly what Acorns does. Only uses Vangaurd popular indexes.

but they charge a fee on top :) it's small, but it basically abstracts away the underlying investment vehicles. it causes Acorns to be a blackbox.

"welp, I don't know where my money is going, it's just going into the Acorns! They handle it all for me!"

Re: Robinhood raises $323M at a $7.6B valuation

#123

Post by smileysteve »

steven2012 wrote: post #113
brianchu wrote: post #45

Earlier quoted context omitted.

Shorting a stock is not a basic feature, it's an advanced feature for power users. You can buy put options on Robinhood already.

It's absolutely a basic feature. It's the opposite of buying a share, and your profit/loss is easy to calculate. With options, you need to worry about premium, time decay, spreads and lower liquidity, etc.

Shorting is very arguably more complicated than put options; Key factors are dividends, float, and short interest.

From a brokerage house perspective, it's a whole other marketplace to set up (brokers willing to back your interest)

Re: Robinhood raises $323M at a $7.6B valuation

#124

Post by webninja »

AznHisoka wrote: post #9

I've been using Robinhood for the past year, and I hope they add basic features such as: - The ability to short a stock, which I still can't believe isn't available. - Price Alerts Everything else is gravy, IMO, especially if they keep the same basic, sleek interface, which I actually like.

You can already create a synthetic short position on Robinhood using options. Between a wide call option credit spread and a put option on the same date, you can short it.

Selling a call option and buying a put option at the same strike price creates the synthetic short. By buying the call option with the highest strike price for the same date or later, Robinhood lets you skip the safety requirement of holding 100 shares of the underlying stock because you’ve capped your max-potential-loss to a fixed amount. Understand that with shorting a stock, you have limited potential gains and unlimited potential losses.

Example synthetic short with the S&P500 Index ETF ($SPY) at $299/share currently: Create Call credit spread by selling June 18th 2021 calls at $300 strike for $24.95/ea and buying June 18 2021 calls at at the highest possible strike of $390 for $1.39/ea. Then buying the June 18th 2021 Put option at the same strike price of $300 for $24.95/ea.

Re: Robinhood raises $323M at a $7.6B valuation

#125

Post by webninja »

smileysteve wrote: post #123
steven2012 wrote: post #113

Earlier quoted context omitted.

It's absolutely a basic feature. It's the opposite of buying a share, and your profit/loss is easy to calculate. With options, you need to worry about premium, time decay, spreads and lower liquidity, etc.

Shorting is very arguably more complicated than put options; Key factors are dividends, float, and short interest. From a brokerage house perspective, it's a whole other marketplace to set up (brokers willing to back your interest)

Fair points but at least you don’t have to worry about changes in implied volatility (Vega) when shorting. You can buy a put option right before an earnings report and watch it’s implied volatility drop like a rock after the earnings report is released. This can remove any profit you would’ve made pretty straightforwardly with a short. Not to mention you also have to pay Theta (time-decay value) all while holding the put option.

Re: Robinhood raises $323M at a $7.6B valuation

#126

Post by webninja »

nodesocket wrote: post #120
hbosch wrote: post #79

Earlier quoted context omitted.

> The ability to short a stock, which I still can't believe isn't available. Honest question: is having access to shorting THAT much different than having the ability to buy puts/sell calls? Shorting isn't the only way to profit in a bear position

Everytime I've bought PUTS its been a losing proposition; Kodak and Beyond Meat (don't want to talk about it). So, I made a hard and steady rule for myself, no more buying PUT options. Instead, just find high quality companies I want to go long on. It's much easier to pick winners than trying to predict losers and the timeframe. I am a big opponent of shoring and buying PUT options.

Want to give it another chance with $TLRY and $CHWY? :D They’re both heading down but you might still (or might not) lose money if the option’s market has already anticipated and priced in the drop. You might also still lose money if IV decreases.

Maybe try it with a paper trading account?

Re: Robinhood raises $323M at a $7.6B valuation

#127

Post by webninja »

almost_usual wrote: post #10
QuackingJimbo wrote: post #4

Robinhood is a predatory lending scheme. The vast majority of its users should not be trading anything other than indexes.

It's everyone's right to shoot themselves in the foot with dumb financial decisions. Robinhood isn't doing anything egregious here, they're only reducing friction and fees. I've used the app sparingly in the past with "fun money" but haven't done serious investing with it.

You can still legally bet your whole life savings on one spin of the roulette wheel. Here’s a guy that did just that:

https://youtu.be/zGCdBsOIKYA

Doesn’t mean you should though. Also Vegas doesn’t have the reputation for capital preservation and growth that brokerages have.

Re: Robinhood raises $323M at a $7.6B valuation

#128

Post by elamje »

MuffinFlavored wrote: post #122
elamje wrote: post #85

Earlier quoted context omitted.

That’s exactly what Acorns does. Only uses Vangaurd popular indexes.

but they charge a fee on top :) it's small, but it basically abstracts away the underlying investment vehicles. it causes Acorns to be a blackbox. "welp, I don't know where my money is going, it's just going into the Acorns! They handle it all for me!"

I don’t mind it. Personally I find that it gives an incredible amount of dollar cost averaging, since as little as $5 gets invested at a time. All transaction fees are included with the $1-$2 a month.

Additionally it’s not a black box because you get to select from 5 options that explicitly show the exact allocation and which ETF it goes to.

To each his own, but I find that it takes away a lot of the psychological thought of investing in a cost effective way. But the $1-2 a month can end up being a large fee if you don’t have more than $10 or $20k invested.

Re: Robinhood raises $323M at a $7.6B valuation

#129

Post by tomp »

elamje wrote: post #90
tomp wrote: post #89

Earlier quoted context omitted.

No, they're not (if my understanding is correct) passing their orders through a middle man , they're passing their orders to a market maker . Market makers don't get "fees" and don't perform arbitrage (they can't, they need to match the best bid/offer). They make money by trading the spread (the difference between offer and bid). They buy at $100.01 (best bid) and sell at $100.02 (best offer) and pocket the differenc…

I'm pretty confident we are talking about the same thing. I was referring to market makers as the middle men because they are not the stock exchange. Call it whatever you want, but trading the spread is arbitrage, i.e. a price mismatch with opportunity to profit.

It's unlikely that we're talking about the same thing. Based purely on your reply I reckon you have your concepts all mixed up.

(1) The exchange is the middle man. The market maker is your counterparty, i.e. the person you actually trade with. The exchange facilitates the trades (often, not always - e.g. you might also trade off exchange, e.g. in dark pools (but you wouldn't do that unless you thought you were getting better prices) or by trading directly with market makers - in which case the US law protects retail customers from being "scammed") and also does clearing which means that it "guarantees" the trades - but that might not really work because an exchange cannot print money and so can go bankrupt itself - recent example in Norway:

https://www.bloomberg.com/news/articles/2018-09-14/nordic-po...

> The loss for Nasdaq’s default fund, that helps guarantee trades, amounts to 107 million euros ($125 million) and the exchange has issued a “replenishment contribution request” to cover the default losses. Current trading members will have to contribute in relation to their size and this is the kind of event the default fund was designed to handle, a company spokesman said.

(2) If you really want to call market-making "arbitrage", sure, go ahead - but it's time arbitrage, not price arbitrage. Similar to how your bank is (or was) doing time arbitrage by connecting short-term deposits with long-term loans (and earning a fee in the process). Without market makers, if you wanted to sell 1 share of AAPL (Apple), you'd have to wait until someone came along wanting to buy 1 share, and then you'd have to agree on a price. Market-makers facilitate trading by continuously providing bid-ask quotes, so that you can sell immediately at a known price, and then 1 hour later someone can buy immediately at a known price (minus the "fee" (spread) that marker makers earn).

All in all, I don't think you even need to use brokers. You can just find buyers yourself and sell directly to them, avoiding the "evil arbitraging market makers" in the process.

Re: Robinhood raises $323M at a $7.6B valuation

#130

Post by elamje »

tomp wrote: post #129
elamje wrote: post #90

Earlier quoted context omitted.

I'm pretty confident we are talking about the same thing. I was referring to market makers as the middle men because they are not the stock exchange. Call it whatever you want, but trading the spread is arbitrage, i.e. a price mismatch with opportunity to profit.

It's unlikely that we're talking about the same thing. Based purely on your reply I reckon you have your concepts all mixed up. (1) The exchange is the middle man . The market maker is your counterparty , i.e. the person you actually trade with. The exchange facilitates the trades (often, not always - e.g. you might also trade off exchange, e.g. in dark pools (but you wouldn't do that unless you thought you were gett…

Thank you for clarifying my misunderstanding.
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