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Robinhood 20yo trader with no income loses 700k on options, takes life

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Re: Robinhood 20yo trader with no income loses 700k on options, takes life

#41

Post by egypturnash »

loeg wrote: post #27
nine_k wrote: post #15

Imagine: "A 20 yo runs across highway in heavy truck traffic, dies". Well, yes. There is an obvious risk, and you either acknowledge this risk and act accordingly, or get struck. Fortunately, if you do a very bad investment, you can sell all your assets, go bankrupt, and keep your life. Too bad the poor guy chose to take his life. But this again looks like not doing enough homework. This is very sad. I wish these thi…

This is pretty tone-deaf.

Exactly the kind of comment I expected to see at the top when I clicked on these comments, really. HN loves to assume that everyone is a perfectly rational person who has infinite time to read and comprehend all minutae before doing anything, and anyone who fails to do this clearly had whatever happens to them coming.

Re: Robinhood 20yo trader with no income loses 700k on options, takes life

#42

Post by Barrin92 »

nine_k wrote: post #15

Imagine: "A 20 yo runs across highway in heavy truck traffic, dies". Well, yes. There is an obvious risk, and you either acknowledge this risk and act accordingly, or get struck. Fortunately, if you do a very bad investment, you can sell all your assets, go bankrupt, and keep your life. Too bad the poor guy chose to take his life. But this again looks like not doing enough homework. This is very sad. I wish these thi…

here we go again. This is like one of these "more people are killed by their washing mashines than by terrorism" takes.

Re: Robinhood 20yo trader with no income loses 700k on options, takes life

#43

Post by fisherjeff »

nine_k wrote: post #15

Imagine: "A 20 yo runs across highway in heavy truck traffic, dies". Well, yes. There is an obvious risk, and you either acknowledge this risk and act accordingly, or get struck. Fortunately, if you do a very bad investment, you can sell all your assets, go bankrupt, and keep your life. Too bad the poor guy chose to take his life. But this again looks like not doing enough homework. This is very sad. I wish these thi…

I mean, I assume he lost significantly more than all his possessions

Re: Robinhood 20yo trader with no income loses 700k on options, takes life

#44

Post by nugget »

redis_mlc wrote: post #4

Young folks: remember, you can always declare bk after a bad options investment. Unlike student loans.

If you read down into the Twitter thread, it seems like the -$700k net balance ("debt") may have simply been a display "error" within Robinhood's system:

"The unfortunate thing is there are certain situations where RH will show this kind of amount due, but it is an anomaly for 24 to 48 hours as things process when selling calls and puts. Uneducated traders think they actually owe these amounts which is not close to accurate[.]"

That explanation would make more sense; I don't see how Robinhood could allow inexperienced traders such amounts of unsecured margin and survive as a business.

Re: Robinhood 20yo trader with no income loses 700k on options, takes life

#45

Post by vmception »

loeg wrote: post #27
nine_k wrote: post #15

Imagine: "A 20 yo runs across highway in heavy truck traffic, dies". Well, yes. There is an obvious risk, and you either acknowledge this risk and act accordingly, or get struck. Fortunately, if you do a very bad investment, you can sell all your assets, go bankrupt, and keep your life. Too bad the poor guy chose to take his life. But this again looks like not doing enough homework. This is very sad. I wish these thi…

This is pretty tone-deaf.

How exactly? Even that whole tweet thread is placing blame on Robinhood who offers worse and less margin/leverage than normal brokers?

If there is energy to direct, it has more to do with people that don't have a self preservation instinct and deciding whether we actually want to add one back to them. Very different than misattributing disdain towards the action they ascribed to their suicide.

It is pretty tone deaf to get this mixed up.

Re: Robinhood 20yo trader with no income loses 700k on options, takes life

#46

Post by bryananderson »

Ghjklov wrote: post #17

On the flip side, if this trader instead made 700k on options, he'd be celebrated as a hero who beat the market at such a young age and Robinhood would be an empowering role in elevating the young and disenfranchised. That is just the reality of the market. I hope this is not setting up so that the powers that be, and the market makers can demonize trading and then regulate away all the new blood who wants to get in…

There is not an equal probability of a day trader making 700k and losing 700k trading options.

Market makers won’t demonize day trading—the “new blood” are their best marks.

Re: Robinhood 20yo trader with no income loses 700k on options, takes life

#48

Post by JKCalhoun »

nine_k wrote: post #37
loeg wrote: post #27

Earlier quoted context omitted.

This is pretty tone-deaf.

Please notice how highways are full of warning signs and barriers that prevent you from accidentally running across them. Same with construction sites, or heavy industrial plants. Maybe other risky places should have more warning signs, so that an optimistic 20-yo would have to stop and think before acting.

So if there are warning signs you're okay with allowing someone with no income to leverage to the tune of $700K?

I think this is the basis for the accusation of tone-deafness.

Re: Robinhood 20yo trader with no income loses 700k on options, takes life

#49

Post by bpodgursky »

mrpopo wrote: post #9
redis_mlc wrote: post #4

Young folks: remember, you can always declare bk after a bad options investment. Unlike student loans.

Why should a bad options investment be better protected than studying?

The backing ethical stance is that EVERYONE should be protected, from everything.

But there's a practical problem applying this to student loans -- nobody who needs student loans will come out of college with meaningful assets. No house, maybe no car, no income. If you could discharge student loans in bankruptcy... there's absolutely no reason to not do it immediately upon graduation. Everyone would do declare BK and clear their debts, for good reason.

So nobody would ever give a student loan. Also for good reason.

So BK doesn't apply to student loans. Obviously there are other fixes here (government paid tuition, income based repayment, online classes, whatever), but the naive fix ("allow students to discharge loans") would not get us to a better-functioning outcome.

(unless your position is that burning the system down is a better outcome than status quo, which is a position, but it's then dishonest to argue that discharging loans is a "quick fix")

Re: Robinhood 20yo trader with no income loses 700k on options, takes life

#50

Post by [deleted] »

cowmoo728 wrote: post #21
hejja wrote: post #3

I'm aware options are complicated, but is someone able to expand on how this is possible? I guess if you short calls you have unlimited downside, no? but it was my understanding that the entire point of options was to cap downside (don't exercise) and maintain upside

He likely did a credit spread and one of the options exercised early. Robinhood shows that you owe $x, but if you look closer you have another option that guarantees that you'll get the stock to cover it, you just have to email robinhood support and tell them to exercise that option too. Very sad that he likely didn't even owe that $700k, just misunderstood the UI in his panic. https://www.reddit.com/r/RobinHood/comm…

[deleted]
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