Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

twitter.com

Post reply on HN
Print view View original

201–210 of 217 posts

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

#201

Post by arminiusreturns »

chii wrote: post #128
arminiusreturns wrote: post #94

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.

> That is not the case for stock purchases - the stock appreciates in value because the business it represents appreciated in value.

There is absolutely no guarantee that this is the case. It's still a gamble. It's just that by the time something IPO's it's much less likely to fail, but it's still possible. Private shares the same. Hence, my original point, it's just a matter of degree of risk.

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

#202

Post by blaser-waffle »

smabie wrote: post #198
AlchemistCamp wrote: post #104

Earlier quoted context omitted.

The efficient market hypothesis says nothing of the sort. Upside and downside with options aren't symmetrical. Unlike when purchasing long positions in stocks, when trading options it's possible to lose many times more money than you initially put in. You also really can't ignore the spreads. Market makers win pretty consistently and everyone else is playing a worse than zero-sum game.

Most brokers aren't allowing regular people to sell tons naked of puts or calls. For almost all retail option traders, their losses are fixed.

Something something Robinhood box spread something

aka the legend of 1r0nyMan

See also: https://www.marketwatch.com/story/trader-says-he-has-no-mone...

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

#203

Post by monksy »

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…

The market doesn't care about your age or identity.

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

#204

Post by wolf550e »

nostrademons wrote: post #102
smabie wrote: post #65

Earlier quoted context omitted.

The efficient market hypothesis says otherwise. If it was easier to lose money (ignoring trading costs and spreads) than it was to make money, I could easily beat the market by doing the opposite of the average joe loser.

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.

patio11's "How Discount Brokerages Make Money" is worth a read: https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone... for those who are interested.

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

#205

Post by binarysolo »

gizmo686 wrote: post #101
binarysolo wrote: post #73

Read a bit and wasn't sure of the exact nature of the 700k loss, but if he somehow got access to all that credit without the assets to back it it, it would seem like people can form a pact, where person A gets credit and bets X on a thing, person B bets the counterparty -X, have X be comically large, one person gets the payoff while the other declares bankrupcty, and basically "gain X/2 for enduring bankruptcy". (We…

This sounds like fraud. Person A would have an asset worth X/2, in the form of his contract with person B. When A declares bankruptcy, his X/2 would be used to partially pay his debtors. This only way this scheme works is if A conceals this during the bancrupty. For comically large X, you can expect to have a team of lawyers and forensic accountants look through your books. If they catch on, you get nothing except a…

Yeah, that makes sense - for a simple scheme like this I'm sure there's some expectation you can't just go around abusing bankruptcy like this.

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

#206

Post by mlok »

AYBABTME wrote: post #66
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…

My 1 year old has no preconception that running across the highway is dangerous, she'd do it in an instant if I let her. We'll spend the next decade teaching her that kind of stuff: - the oven doesn't look dangerous, but it's hot - this water looks like the other one, but it's boiling and will hurt - a car can drive across the street and run over you - the electric outlet looks passive but it'll electrocute you Aside…

This reminds me of this brilliant interview with Ricky Gervais about atheism and religion : https://youtu.be/rYnjDCZUV6A?t=43

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

#207

Post by colinmhayes »

bananamerica wrote: post #26
redis_mlc wrote: post #4

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

Also, many people will agree that having a low income (and even being poor) may not be awesome, but sure beats being dead.

Disagree, life already sucks with money. Not worth living without it.

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

#209

Post by stu2b50 »

tedmiston wrote: post #193
nugget wrote: post #44

Earlier quoted context omitted.

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 a…

This glitch showing a massively incorrect balance sounds absurd. Is there a logical explanation? Is it a bug?

No, it's just how it works. Like if you front for food for a big party, you might have a -1000 charge on your CC, but then you get paid back. The - 1000 is "real", just temporary.

Specifically, in a spread he might have lost 770k on his short but up 760k on his long, so his actual loss at the end was just 10k.

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

#210

Post by throwawaygh »

Traster wrote: post #160

This feels a bit like the tide pod challenge. It isn't necessarily RH's fault that a group of bored teenagers have decided to spend their spare time lying on the internet about options trading. It starts with a small group of trolls thinking it would be funny to bullshit about something and before you know it you've got a community that's a wonderful mix of people in on the joke and people actually burning their life…

nb other trading platforms do try to educate their consumers. rh makes it very easy to trade options.
Post reply on HN