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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

#111

Post by alexwebb2 »

nine_k wrote: post #87
egypturnash wrote: post #41

Earlier quoted context omitted.

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.

An app is not a table saw.

And your comment here is at odds with the tone you used above.

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

#112

Post by hejja »

wpietri wrote: post #64
amiga_500 wrote: post #56

Earlier quoted context omitted.

People "made" 700k for him to lose it, less fees. Because speculative trading is a zero sum game, it creates no wealth. And no, this isn't wheat farmers hedging bad weather.

Yeah, I think fees and externalities mean that speculation is a negative-sum game. I used to work for financial traders, but I quit that industry because I decided it was, however lucrative, a net societal negative.

that plus the industry pulling in a lot of smart people who could have spent their time elsewhere

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

#113

Post by nostrademons »

Ghjklov wrote: post #107
nostrademons wrote: post #102

Earlier quoted context omitted.

There are firms that do exactly this. Robinhood's business model is to sell the order-flow data of its users to HFT hedge funds, who then take the opposite side of the trade. It's proven very profitable both for Robinhood and for funds that do this.

Why is that okay for them to do that? Genuinely curious.

It's a dark pattern, but there's nothing illegal about it. Their privacy policy states "We may also share information with others in an aggregated or otherwise anonymized form that does not reasonably identify you directly as an individual." Knowing that there exists someone who is about to buy TSLA does not identify that person, and yet is still incredibly useful to a market-maker. Selling data you've collected (without identities attached) is legal and largely unregulated. And the actual transaction is an ordinary B2B customer relationship.

Amazingly, a significant number of Robinhood customers are aware that they do this and don't care.

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

#114

Post by unishark »

School-Cotton wrote: post #54
mrpopo wrote: post #9

Earlier quoted context omitted.

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

Because otherwise nobody would offer student loans.

They would certainly be a lot more careful in who they lend to. Which would go back to divisions between college-worthy and not that many people don't like.

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

#115

Post by wdr1 »

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…

He wasn't a professional trader or anything like that.

He was a kid with no income. Was they did they allow him access to so much leverage?

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

#116

Post by joeblow9999 »

Apocryphon wrote: post #105
sytelus wrote: post #83

Earlier quoted context omitted.

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 s…

Ideally, it would be great for a country to have systems in place so that the worst you can possibly lose is less than everything.

how would you make it so that i cant bet all my money

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

#117

Post by unishark »

Apocryphon wrote: post #105
sytelus wrote: post #83

Earlier quoted context omitted.

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 s…

Ideally, it would be great for a country to have systems in place so that the worst you can possibly lose is less than everything.

Technically I think there are lots of such laws. Like protecting the house you live in.

But in the case of things like taxes and child support, you can ultimately lose a lot more than everything.

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

#118

Post by readams »

stevens32 wrote: post #34
throwaway2048 wrote: post #13

Earlier quoted context omitted.

I don't see how that reasoning applies to one, but not the other circumstance.

Student loans are cheap and available because they can't be defaulted on. If lenders don't get those guarantees, they won't want to lend at the lower rates or approve people as easily.

The federal government guarantees almost all student loans. This is why they are cheap. Default exists regardless of whether the debt can be easily discharged in bankruptcy.

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

#119

Post by logicchains »

amiga_500 wrote: post #75
logicchains wrote: post #70

Earlier quoted context omitted.

>Because speculative trading is a zero sum game, it creates no wealth. Speculative trading is a key component of markets. People speculate that X is undervalued, so they invest in X, this gives X more resources, so resources are allocated based on what people think has most potential for growth. People who continuously make bad predictions get filtered out of the market, so "what people think has most potential for g…

It's the secondary market. Companies get nothing on a bet they win or lose. People betting on a soccer game have zero effect on the future of soccer.

Secondary markets can definitely influence the price of the underlying asset, especially if they're more liquid.

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

#120

Post by nknealk »

abiogenesis wrote: post #110

Wait, is it possible to "owe" money to Robinhood? I have never used them but I was under the assumption that you can only lose the money you deposited, because of the leverage, but you can not go negative. The tweet seems to imply that too, but a lot of the comments here look misinformed.

I think that’s the default for any brokerage product.

However, when you apply for options trading, you have the option to add margin to your account. It’s essentially just a tick box. It appears from the twitter thread that this user unknowingly added margin to his account, traded on margin, then had a really big margin call.

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