181–190 of 316 posts
Interesting counter point to the "elites-pulling-levers-to-protect-hedgies" conspiracy theory: https://twitter.com/arampell/status/1354859474658312196?ref_...
we placed it to mitigate the risk on your account Wow, that's pretty awful since liquidating the position may actually put the user at a net loss, which wouldn't avoid risk: It would actually "instantiate" the potential risk of having to sell the stock after falling below the purchase price. Why not give users the opportunity to provide more collateral for their margin?
Earlier quoted context omitted.
I honestly didn't read the agreements on Robinhood. Before you call me stupid or irresponsible, I'm going to say practically no one reads these agreements, and even fewer understand them. The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line: > A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tec…
Yes. Is that one way of describing the "find a bigger fool" strategy of investing? Is that the purpose of these apps? To get uninformed liquidity into the market to benefit investment banks?
RH is no different than any other startup in this regard. They aren't going to open themselves up to the risk of not following a margin agreement in the name of "the revolution!" They are in the business of making money, even if that means users lose their shirts.
And if people have been trading GME, AMC, et al on margin? (I mean, unless the government steps in or something?) I'm afraid a lot of them are going to be losing their shirts in the coming weeks.
Obviously, margin calls are legitimate. But Robin Hood obviously played an important role in the price direction that led to the margin calls. I honestly don't know how anyone could trust RH as a neutral party after this.
Earlier quoted context omitted.
I honestly didn't read the agreements on Robinhood. Before you call me stupid or irresponsible, I'm going to say practically no one reads these agreements, and even fewer understand them. The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line: > A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tec…
This isn't just TOS though. It's a pretty short and easy agreement that you're accepting. https://cdn.robinhood.com/assets/robinhood/legal/RHF%20and%2... You'll find a similar concise and clear statement from every broker when you enable margin trading.
we placed it to mitigate the risk on your account Wow, that's pretty awful since liquidating the position may actually put the user at a net loss, which wouldn't avoid risk: It would actually "instantiate" the potential risk of having to sell the stock after falling below the purchase price. Why not give users the opportunity to provide more collateral for their margin?
Yeah, brokerages will do that if the stock takes a big drop like it did today. Oh, did you not read that part of your margin agreement? According to thread, some are just now getting to that part. Those same folks shouldn't have been trading GME on margin. If it's any consolation, I've had Fidelity, IB, et. al., do the exact same thing when a trade turned sour. Difference is, I didn't run to Reddit to display my igno…
I though they would generally give you the opportunity to provide more collateral for your margin though. Or am I wrong on that?
Yeah, brokerages will do that if the stock takes a big drop like it did today. Oh, did you not read that part of your margin agreement? According to thread, some are just now getting to that part. Those same folks shouldn't have been trading GME on margin. If it's any consolation, I've had Fidelity, IB, et. al., do the exact same thing when a trade turned sour. Difference is, I didn't run to Reddit to display my igno…
This is, frankly, common sense. If you deposit $100, buy $300 of stock, and that stock falls below $200, your account's equity will go below zero and your broker is in trouble. If this happens on a large enough scale, the market will be in trouble. The broker will try to protect itself by liquidating your position before this happens, and they may even be required to by market rules.
(The actual calculation of required margin is quite complex for good reason.)
Commenters saying that this is understandable and simply how margin trading works might be missing this part of the story: https://blog.robinhood.com/news/2021/1/28/keeping-customers-... > We also raised margin requirements for certain securities. Is that how margin trading always works? The broker can just without prior notification increase your collateral requirement and liquidate you instantly?
Earlier quoted context omitted.
I honestly didn't read the agreements on Robinhood. Before you call me stupid or irresponsible, I'm going to say practically no one reads these agreements, and even fewer understand them. The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line: > A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tec…
> I'm going to say practically no one reads these agreements, and even fewer understand them. This might be true for the myriad of free online services and applications most people use on the daily. But with anything I plan to spend or invest my money in/give my real personal information to I will most certainly take care to properly read and understand what I'm agreeing to there. In that context, comparing your mort…
And when you don't understand the dense legalese how did you get clarification? Did you pay a few hundred dollars to have a lawyer review the contract and explain it to you? Perhaps call the company up to have a minimum wage call center employee explain it to you? Or just come up with an interpretation of the text that seems to make sense and conclude that must be what they mean?
After awhile even doing that grows tiresome for all but the most important services. So, we really do need something better.