He actually didnt lose 700k it was a UI problem.
Where’s the source to that?
20-year-old lost 700k on Robinhood options, takes life
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Re: 20-year-old lost 700k on Robinhood options, takes life
#12He actually didnt lose 700k it was a UI problem.
Where’s the source to that?
It's a pretty well known Robinhood "glitch" at this point. Has to do with how they handle assigned/exercised legs of option spreads.
Example:
https://old.reddit.com/r/wallstreetbets/comments/aohvow/hi_t...
Re: 20-year-old lost 700k on Robinhood options, takes life
#13A while ago I got a recruiting email from somebody at Robinhood. In it, they listed the number of times their average user interacts with the app daily and framed the high number as something to be proud of.
For a lot of services, this is a neutral (or even good) metric. But for an investing platform, encouraging people to interact more is a fabulous method of turning it into gambling and causing people to blow a huge amount of money.
Re: 20-year-old lost 700k on Robinhood options, takes life
#14Is it a fair question to ask if one should be allowed to manage 700k via a mobile app? You can’t even have more than 250k in a bank that’s FDIC insured.
Most of our most effective safeguards in life is to straight up take away even the possibility of fucking up. It doesn’t sound like Robinhood wants to take on any ethical responsibility when things are put in those terms.
Re: 20-year-old lost 700k on Robinhood options, takes life
#15Is it a fair question to ask if one should be allowed to manage 700k via a mobile app? You can’t even have more than 250k in a bank that’s FDIC insured. Most of our most effective safeguards in life is to straight up take away even the possibility of fucking up. It doesn’t sound like Robinhood wants to take on any ethical responsibility when things are put in those terms.
What's the difference between a mobile app vs any other interface other than convenience? Should I be required to talk to a financial advisor before managing my own freaking money that I earned?
While we're at it why don't we make Amazon track user bank accounts so they can decide what you can and can't afford and stop you before you buy that $10,000 TV when you still have credit card debt?
Not saying there should be no safety rails, but as an adult you are allowed to ruin your life through bad decisions. Society's obligation is to provide reasonable protection from things outside your control and point out the obvious pitfalls you may not be aware of.
Fidelity tried to upsell me on their margin trading system. At the time I had no idea what trading on margin was, so I read some blogs, watched some YouTube videos, did some high school algebra and decided the risk wasn't worth it at the rates they were offering. For people who don't have that kind of time/education, know your limits and maybe don't buy something you don't at least fundamentally understand.
At what point are people expected to own their mistakes? Seems like every time a story like this pops up there's a discussion as to how to make systems more paternalistic, bail out individuals for their stupid decisions the same way the government bails out corporate America. The correct social response in both cases IMO is the opposite. Financial failure shouldn't be death, but it should have teeth. This guy likely could have declared bankruptcy and recovered in a few years. That is a reasonable safety net IMO.
Re: 20-year-old lost 700k on Robinhood options, takes life
#16What happens if you over leverage and end up owing your broker after a bad trade and you can't pay it back..
In my understanding in buying options you can only lose the premium you pay upfront. Selling options however you can get burnt.
Depends.
You can sell a in money call, and buy 2x out of money calls.
You only lose if the asset's price falls between your sell/buy.
The point is selling isn't bad. Its not managing risk that kills you. And for this poor dude it did.
Re: 20-year-old lost 700k on Robinhood options, takes life
#17Earlier quoted context omitted.
Where’s the source to that?
It's a pretty well known Robinhood "glitch" at this point. Has to do with how they handle assigned/exercised legs of option spreads. Example: https://old.reddit.com/r/wallstreetbets/comments/aohvow/hi_t...
Well also, on pretty much every brokerage, if you get assigned a leg of a spread while your position is ITM then your balance drops through the floor far beyond what your max loss is. But that's just temporary until you close the position fully.
I would hope that isn't what happened here because he could have just closed the other side of the assigned leg and accepted a much more modest loss.
edit: this is where a standard brokerage shines. when this first happened to me i called TDA and they walked me through how to get out of my shitty position. Not sure you can do the same with RH.
Re: 20-year-old lost 700k on Robinhood options, takes life
#18Is it a fair question to ask if one should be allowed to manage 700k via a mobile app? You can’t even have more than 250k in a bank that’s FDIC insured. Most of our most effective safeguards in life is to straight up take away even the possibility of fucking up. It doesn’t sound like Robinhood wants to take on any ethical responsibility when things are put in those terms.
What's the difference between a mobile app vs any other interface other than convenience? Should I be required to talk to a financial advisor before managing my own freaking money that I earned? While we're at it why don't we make Amazon track user bank accounts so they can decide what you can and can't afford and stop you before you buy that $10,000 TV when you still have credit card debt? Not saying there should be…
I understand the sentiment, and you are right on many fronts, we cannot absolve the reality that people do have agency over their decisions.
But, I’ll suggest a testable number. You can buy the 10k TV, no problem. I just don’t think that idea is scaleable indefinitely. Over 250k, I want to force you to make a 5k deposit and agreement with a bankruptcy lawyer so if it goes bad, we automatically bankrupt you. And I want to hire a nice Frontend and product team to make a seamless one-click bankruptcy agreement contract for both sides in a user friendly app. Both the lender and buyer agree to this outcome. Let’s see how that hard limit impacts things. Let’s have you get on the phone with the bankruptcy lawyer to also give verbal consent.
These edge cases can be covered. Go try to get a gun license in Japan and see the types of hoops you have to jump through. It is a prohibitive process that probably reduces gun ownership by a lot.
Re: 20-year-old lost 700k on Robinhood options, takes life
#19Earlier quoted context omitted.
Where’s the source to that?
It's a pretty well known Robinhood "glitch" at this point. Has to do with how they handle assigned/exercised legs of option spreads. Example: https://old.reddit.com/r/wallstreetbets/comments/aohvow/hi_t...
That is one pretty scary "glitch" as it seems to want to enforce the loss
Re: 20-year-old lost 700k on Robinhood options, takes life
#20This is more common than than thought. Fortunately (or not?) these cases don't hit the press.