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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

#171
post #128

Earlier quoted context omitted.

The entire financial market is gambling, it's just a matter of degree of risk, and the higher the risk the higher possible return. People need to stop fooling themselves otherwise.

investing in a business (buying stocks) is not the same as speculating. Options trading is speculative in nature, because for someone to "win", someone else has to lose. That is not the case for stock purchases - the stock appreciates in value because the business it represents appreciated in value. Just because something has risk, doesn't automatically make it gambling.

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

#172
post #115
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?

Guessing it's related to a bug on the platform from last year.

https://www.bloomberg.com/news/articles/2019-11-05/robinhood...

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

#173
post #156

This is tragic. The consensus I've gathered is that this was a result of a stock option credit spread's short leg being assigned combined with a misunderstanding of the trading platform's reporting. If this is true, an analogy for the situation would be: The individual bet on a coin flip, wagering $10 (representing the $700k) on heads and $9 (figurative amount representing the spread) on tails. The outcome was tails.…

How do you know this?
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