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Robinhood and How to Lose Money

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Re: Robinhood and How to Lose Money

#21

Post by JumpCrisscross »

grecy wrote: post #19
platz wrote: post #7

Earlier quoted context omitted.

You can do those things on any brokerage. You can buy options pretty much anywhere. Not seeing where the democratization is coming from that is different from the status quo

My brokerage will only let me buy options in the standard batch of 100, which means to get anything I'm interested in I need to drop $20k, which isn't going to happen. I only want to spend a couple of hundred on long term options ..

> I only want to spend a couple of hundred on long term options

Former options market maker. And honest question. Why?

Long-term options are tricky because theta and rho, the least intuitive components of the option pricing model, become significant as tenor increases. If you want to take a leveraged bet on the market, a margin account or leveraged ETF is safer.

Re: Robinhood and How to Lose Money

#22

Post by pjc50 »

dmoy wrote: post #11

I do not get the appeal of largely gambling with your money on RH instead of just passively investing for the long term. Maybe with some of your money, but not to the extent a lot of people are doing. People want to get rich quick I guess? Even if you do want to do that, why not pick a brokerage which doesn't take as much from you, like IBKR? It's just a surreal situation to me.

Adrenaline?

Same motivation as gambling. You can enjoy the hope of the possibility of wealth. Steady investment will never give you that. Of course, this involves a heavy dose of self-delusion, also popular these days.

Re: Robinhood and How to Lose Money

#23

Post by grecy »

JumpCrisscross wrote: post #21
grecy wrote: post #19

Earlier quoted context omitted.

My brokerage will only let me buy options in the standard batch of 100, which means to get anything I'm interested in I need to drop $20k, which isn't going to happen. I only want to spend a couple of hundred on long term options ..

> I only want to spend a couple of hundred on long term options Former options market maker. And honest question. Why? Long-term options are tricky because theta and rho, the least intuitive components of the option pricing model, become significant as tenor increases. If you want to take a leveraged bet on the market, a margin account or leveraged ETF is safer.

I have a good portfolio of stocks, and to be honest I want to bet a hundred or so here or there. I never buy lottery tickets or anything like that, but I feel like it's a good chance to take.

It has nothing to do with safe, and is about risk v reward.

Re: Robinhood and How to Lose Money

#24

Post by system2 »

What's the reason of this article showing RH as an evil corp? People also gamble in Las Vegas, no one is stopping them.

It is a good tool, thought me a lot about stocks and options. I am not investing heavily, but overhead of my investments would be far more higher with other competitors.

The other trading companies literally asked my lifestory, bunch of scans and very long process of acceptance. Let alone their extremely cumbersome software would possibly (I am certain) lose more money because of the mistakes I would make.

Re: Robinhood and How to Lose Money

#25

Post by chii »

jesterson wrote: post #10
dlivingston wrote: post #5

Robinhood was an absolute game changer for me. Outside of my 401k (and a Viacom stock my mom bought me 20+ years ago to teach me about the stock market), my investment portfolio was nil. I now maintain a growing but conservative portfolio of stocks thanks partly to the frictionless UX of Robinhood - but, primarily, to the addition of fractional shares. To pay $1500 for a share of TSLA? When I could put that precious…

That's the problem of RH - in your cases stock is managed because of "frictionless UI" whilst it should be managed due to financial considerations but not because they have made it easy as getting a cup of coffee. You need to understand the model how low cost services like RH operate - they sell all your data to big hedge funds. Guess what happen at certain moment when smart money will decide it's time to cut pigs -…

how does order-book sales (if it even happens - apparently it's not legal?) affect your existing shares in RH?

Unless you are trading, tiny differences in the price at purchase and sale is unlikely going to make a big difference to your final total returns. I would just consider it cost of the transaction.

Re: Robinhood and How to Lose Money

#26

Post by enilakla »

Lol...They can sell my order flow all they want as long as I’m still earning

Edit: Downvote all you want. That all brokers (well, not all, depending on your account) sell your flow to Citadel et el is well discussed, and RH has an even better client base to ‘sell out’...

The point I’m making is that for some users they don’t really care it it currently ‘works well enough’ for whatever they’re doing.

Re: Robinhood and How to Lose Money

#27

Post by renewiltord »

dmoy wrote: post #11

I do not get the appeal of largely gambling with your money on RH instead of just passively investing for the long term. Maybe with some of your money, but not to the extent a lot of people are doing. People want to get rich quick I guess? Even if you do want to do that, why not pick a brokerage which doesn't take as much from you, like IBKR? It's just a surreal situation to me.

Same with gambling, I imagine. The utility of 107% guaranteed of this dollar is less than a less than one in a billion chance at a billion dollars.

The net expected value of the dollar doesn't have to be positive. Losing $2000 over 80 years of your life is certainly worth is a non-factor for many.

Add in the fact that RH has reduced barriers to entry to investing. It's way easier to get RH and buy VOOG than to get Vanguard set up. I have enough in both to know.

Re: Robinhood and How to Lose Money

#28

Post by throwaway1777 »

drevil-v2 wrote: post #15
dlivingston wrote: post #5

Robinhood was an absolute game changer for me. Outside of my 401k (and a Viacom stock my mom bought me 20+ years ago to teach me about the stock market), my investment portfolio was nil. I now maintain a growing but conservative portfolio of stocks thanks partly to the frictionless UX of Robinhood - but, primarily, to the addition of fractional shares. To pay $1500 for a share of TSLA? When I could put that precious…

It just boggles the mind how people were able to invest for hundreds of years without a frictionless UX.

No offense, but how old are you? Most parts of life used to have way more friction.

Re: Robinhood and How to Lose Money

#29

Post by mlyle »

flattone wrote: post #16
jesterson wrote: post #10

Earlier quoted context omitted.

That's the problem of RH - in your cases stock is managed because of "frictionless UI" whilst it should be managed due to financial considerations but not because they have made it easy as getting a cup of coffee. You need to understand the model how low cost services like RH operate - they sell all your data to big hedge funds. Guess what happen at certain moment when smart money will decide it's time to cut pigs -…

Youre saying at some point big HF will say 'a bunch of robin money is in some stock(s)' and make a move to cause losses for the RH folks? >It has happened before in history When?

Big HF will see event requiring lots of RH people to pull liquidity, and know what equities this will move, and move first.

Not to mention that big HFT uses order book data from retail to vacuum away pennies on every transaction.

Re: Robinhood and How to Lose Money

#30

Post by renewiltord »

jesterson wrote: post #10
dlivingston wrote: post #5

Robinhood was an absolute game changer for me. Outside of my 401k (and a Viacom stock my mom bought me 20+ years ago to teach me about the stock market), my investment portfolio was nil. I now maintain a growing but conservative portfolio of stocks thanks partly to the frictionless UX of Robinhood - but, primarily, to the addition of fractional shares. To pay $1500 for a share of TSLA? When I could put that precious…

That's the problem of RH - in your cases stock is managed because of "frictionless UI" whilst it should be managed due to financial considerations but not because they have made it easy as getting a cup of coffee. You need to understand the model how low cost services like RH operate - they sell all your data to big hedge funds. Guess what happen at certain moment when smart money will decide it's time to cut pigs -…

This doesn't jibe with what Matt Levine describes as RH's operating model. Unless you're actually informed, this just sounds like Internet urban myth. You actually can get better results because as a retail trader participating with other retail traders you have uncorrelated order flow.
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