This is just a slightly more obfuscated "binary options" betting scam.
A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage
Gamble alright.
Robinhood stock trading app confirms $110M raise at $1.3B valuation
51–60 of 394 posts
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#52“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…
"Three things ruin people: drugs, liquor, and leverage - Charlie Munger" - ???
Leverage is the ability to use credit or partial collateral (i.e., non-secured or non-fully-secured assets) to purchase other assets.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#53Earlier quoted context omitted.
Might be questionable for investors (although trading on margin is extremely common) but gambling seems to make a ton of money for casinos, betting parlors and lottery boards, many of which have been around for "long term." Sounds more like you have moral/personal objection.
Casinos do not make money on borrowing for gambling, but on gambling.
I would expect that they also make money on borrowing for gambling. How do you know that they don't?
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#54Earlier quoted context omitted.
And regulated - you have to be approved for margin trading by the brokerage.
I thought it was based on the % you traded? So for example, if I was using an 100k account to trade, I had another 100k of leverage no?
At least often, yes, but you will also need approval to even get that far. Etrade for instance has several levels of approval.
I note that Etrade at least implements it less as "margin approval" and more as "advanced mode"; to do any sort of options trades, even the ones that don't require margin themselves, requires you to activate the "margin feature" on your account.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#55Earlier quoted context omitted.
Casinos do not make money on borrowing for gambling, but on gambling.
It is very very common for Casinos to loan you money. This is how people often end up in debt by thousands (100s of thousands) of dollars to casinos, which causes all kinds of problems. From the casino POV.. why limit their wins to what is in your pocket? Limit their win to what is in your pocket + what the risk model predicts they can make you pay back over time.
Casino have truly insane margin on the money you play with them (and equally truly insane revenues).
When they lend you money, they know exactly how much of that will go back to their hands soon (and they have a ton of cash flow to cover).
Robinhood is effectively lending money with little guarantee to take anything back and no source of income.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#56Earlier quoted context omitted.
Casinos do not make money on borrowing for gambling, but on gambling.
It is very very common for Casinos to loan you money. This is how people often end up in debt by thousands (100s of thousands) of dollars to casinos, which causes all kinds of problems. From the casino POV.. why limit their wins to what is in your pocket? Limit their win to what is in your pocket + what the risk model predicts they can make you pay back over time.
Reminds me of Owning Mahowny
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#57“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…
Why do people that work in finance hate the idea of personal investing? Is it because you are losing out on somebody paying you for your market insight?
Investment is always good. The only person losing out with apps like this are investment advisors like you.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#58Earlier quoted context omitted.
It is very very common for Casinos to loan you money. This is how people often end up in debt by thousands (100s of thousands) of dollars to casinos, which causes all kinds of problems. From the casino POV.. why limit their wins to what is in your pocket? Limit their win to what is in your pocket + what the risk model predicts they can make you pay back over time.
Casino have truly insane margin on the money you play with them (and equally truly insane revenues). When they lend you money, they know exactly how much of that will go back to their hands soon (and they have a ton of cash flow to cover). Robinhood is effectively lending money with little guarantee to take anything back and no source of income.
They don't charge commission.
They do receive payments for order flow.
If you don't pay back your margin they'll come after you like any other debt collector. There's nothing special about it.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#59Earlier quoted context omitted.
All the major retail brokers sell their order flow, so you generally eat this cost no matter who you use. In addition, the hidden cost is fractions of a penny on the dollar (so still better than the $5-7 a regular broker charges per trade anyways).
What's the long play then? Surely Robin Hood isn't absorbing the the transaction fees as a loss leader just to increase it's user base? If that's the play, any other company can emulate that.. The incentive seems to be this may cause a price war with existing brokerages.
If I have to guess a business model:
They get a good deal on the commission and they get enough money from the gold subscribers to cover the commissions across all users.
A fix subscription package is user friendly and easy to understand. It can be "better" for business than a variable commission on trades.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#60Earlier quoted context omitted.
Can you extrapolate on order flow from unsophisticated investors? Why is it valuable?
Because when you buy shares on a platform you don't buy them yourself. You don't have an account at the exchange. The brokerage buys them on their account. So let's calculate the fees. For a given stock, FCKD, the bid offer is $4.50, the lowest offer is $4.60. Transaction costs for this are $0.10 at the brokerage. Investor A wants to buy a share, B wants to sell one, on the same brokerage. Okay let's see. Brokerage d…
None of this makes any sense: Where did you get this information? You should ask for your money back:
>(100% - 10%) * 2 * $4.55 + $0.40, and pays that out to it's shareholders/managers
>(twice, because once in cash, one in a share)
>can we borrow against that ?", and the next bank say "sure ! if we can do the same
> Since this also counts as reserves
> pay 90% out to their shareholders.
> if the market were to gasp drop even slightly
> Assuming 10% reserve ratio (which is on the high end, usually either 2 or 4%)