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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

#81

Post by X-Istence »

james412 wrote: post #19
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

Robin Hood has various tricks allowing your buying power to be inflated artificially, there have been a bunch of reports about it. It also appears RH users get margin accounts by default, at least from everything I've read. If that's true, it's probably the real problem. In the EU retail traders are permitted access to margin, but brokers are required to eat any loss exceeding the value of the account. It's not enoug…

> It also appears RH users get margin accounts by default, at least from everything I've read. If that's true, it's probably the real problem.

No, you have to explicitly opt-in to it.

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

#82

Post by gruez »

BoorishBears wrote: post #57
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…

Robinhood is such an ironic name for the app. The elephant in the room is, the people who Robinhood is supposedly letting buy into a vast money fountain that is the stock market already had a way to get in. The fees that other brokorages were charging shouldn't have mattered if these people were investing in the only responsible way for someone who doesn't know what they're doing... and that's buying into an index fu…

>If Robinhood was really about doing what it claims to do, the app would have 3 tickers, QQQ, SPY, and DIA.

Is that what robinhood is supposed to be? A conservative retirement savings portfolio? Sure, the app store tagline says "Invest. Save. Earn.", but the listing also mentions highly speculative instruments like cryptocurrency and derivatives. It also promises access to "real-time market data" and "relevant news articles" which is only needed when you're taking on an active management style. Clearly the app isn't designed as something you chuck money into now, and withdraw a few decades later.

>By it's very nature, the people who end up in Robinhood, who wouldn't be able to get "into" other brokrages

The reason why they wouldn't "get into" the other brokerages is because they transact in such small amounts that they'll lose most of their capital on trading fees. I don't see anything wrong with letting people make small trades that they wouldn't have otherwise been able to make.

>And when you put money in, it'd warn you that you should be ready to leave that money there for at least 5 years.

How about we let the users take personal responsibility? I like Matt Levine's idea of "Certificate of Dumb Investment". Disclose the risks to them, and let them do whatever they want. https://www.bloomberg.com/opinion/articles/2018-09-24/earnin...

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

#83

Post by sytelus »

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 think every high school student should have one day class dedicated on following topics and so many lives would be saved:

1. Folies of investments, how you can lose everything.

2. Folies of marriages, divorce laws and how you can lose everything.

3. Folies of gambling in casinos and how you can lose everything.

4. Folies of alcohol, tobacco and other soft drugs and how you can lose everything.

Each of these class should be given by 2-3 people who actually lose everything in these cases.

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

#84

Post by gonzo41 »

redis_mlc wrote: post #4

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

This is good advice. And if you're twenty you can decalre BK do other things like walk the PCT CDT and AT then study in a library. And then bang! you're 27 and all of this is behind you. Your fit, healthy and educated and not going to make the same mistake twice.

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

#85

Post by lazyasciiart »

Ghjklov wrote: post #77
bryananderson wrote: post #46

Earlier quoted context omitted.

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.

But the possibility exists. That you can make money by simply trading stocks, without actually putting much in too much work and time (outside of research and education). I have a hunch, just a feeling, that the powers that be prefer that we normal people not know about how they make money by simply trading around stocks with excess money they have laying around.

Nonsense, they advertise lotteries everywhere.

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

#86

Post by nnoitra »

metrokoi wrote: post #18

Being able to trade with no experience and oversight is one of those things that seems like it should be illegal. I can't think of any way you can go so far in debt more quickly. Even if I tried to buy a bunch of cars or houses I can't afford I would just get rejected.

How on earth wasn't he rejected going -700K?

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

#87

Post by nine_k »

egypturnash wrote: post #41
loeg wrote: post #27

Earlier quoted context omitted.

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.

A person who goes on to operate a large table saw, very rational or not, should read a manual, and become acutely aware that cutting off their limbs is a very real danger.

Anyone who sells access to such a tool should make sure of that happening. That's my point.

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

#88

Post by nnoitra »

MattGaiser wrote: post #80
metrokoi wrote: post #18

Being able to trade with no experience and oversight is one of those things that seems like it should be illegal. I can't think of any way you can go so far in debt more quickly. Even if I tried to buy a bunch of cars or houses I can't afford I would just get rejected.

> Even if I tried to buy a bunch of cars or houses I can't afford I would just get rejected. Try one of the auto houses or any of the sketchy mortgage brokers. They will lend to you.

And when he doesn't pay back?

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

#90

Post by Ghjklov »

lazyasciiart wrote: post #85
Ghjklov wrote: post #77

Earlier quoted context omitted.

But the possibility exists. That you can make money by simply trading stocks, without actually putting much in too much work and time (outside of research and education). I have a hunch, just a feeling, that the powers that be prefer that we normal people not know about how they make money by simply trading around stocks with excess money they have laying around.

Nonsense, they advertise lotteries everywhere.

Lotteries aren't really the same thing as holding shares in a company.
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