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

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

#51

Post by RIMR »

meritt wrote: post #33
enilakla wrote: post #31

Something seems off here. The person would have had to have significant assets or collateral to end up negative; regardless of age and income. It just doesn’t work like that.

You're right, but due to Robinhood's terrible UI/UX, when you hold a spread and the short leg gets assigned, it shows your account as owing an astronomical amount. In reality, you have an opposite leg that gets exercised and you're only out the difference in the spread (which that risk is based on your account balance/margin/etc). This kid didn't lose $700k, his account just shows -$700k until Monday morning when it…

This is exactly right.

This story just got a lot more tragic... He maybe lost $10k. Maybe nothing at all.

Hell, he might have made money, but the RH UI just showed him this abysmal number.

Or there's more to this story. I would be interested in knowing how long the issue had been going on, and if RH support had been contacted.

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

#52

Post by adsfgnionio »

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…

>he'd be celebrated as a hero who beat the market at such a young age

He'd be a lucky fool in my book.

This sort of trading is gambling, pure and simple. Winning doesn't retroactively make it a good decision to play.

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

#54

Post by School-Cotton »

mrpopo wrote: post #9
redis_mlc wrote: post #4

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

Why should a bad options investment be better protected than studying?

Because otherwise nobody would offer student loans.

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

#55

Post by gdulli »

mrpopo wrote: post #9
redis_mlc wrote: post #4

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

Why should a bad options investment be better protected than studying?

Since student loans come right at the start of everyone's adult life, it would be very common to strategically declare bankruptcy upon graduation, writing off good credit in your mid 20s in exchange for free education.

That's my understanding of why student loans have to stick with you.

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

#56

Post by amiga_500 »

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…

People "made" 700k for him to lose it, less fees.

Because speculative trading is a zero sum game, it creates no wealth. And no, this isn't wheat farmers hedging bad weather.

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

#57

Post by BoorishBears »

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…

Robinhood is such an ironic name for the app.

The elephant in the room is, the people who Robinhood is supposedly letting buy into a vast money fountain that is the stock market already had a way to get in.

The fees that other brokorages were charging shouldn't have mattered if these people were investing in the only responsible way for someone who doesn't know what they're doing... and that's buying into an index fund and leaving it for several years.

By it's very nature, the people who end up in Robinhood, who wouldn't be able to get "into" other brokrages, are the kinds of people who get eaten up whole by the rest of the market.

It's the rich stealing even more from the poor, while giving them the illusion they're all sitting at the same table eating the same meal. -

If Robinhood was really about doing what it claims to do, the app would have 3 tickers, QQQ, SPY, and DIA.

And when you put money in, it'd warn you that you should be ready to leave that money there for at least 5 years.

It sure as hell wouldn't have options trading.

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

#58

Post by nine_k »

throwaway888abc wrote: post #35
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…

I know others who make profit from borrowing leverage and bet that Robionhood is doing same. What you propose is nice, but against platform financial interests.

I bet having to publicly explain real credit card interest rates, or the components of food, or conflicts of interest for top corporate officers, can be against some powerful interests.

But I suppose this such cases are some of the few cases where regulations (not even necessarily state-imposed) really work in the public interest.

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

#59

Post by tttp »

jdminhbg wrote: post #24
throwaway2048 wrote: post #13

Earlier quoted context omitted.

I don't see how that reasoning applies to one, but not the other circumstance.

The answer is right there. Bankruptcy is legally a recourse of the credit extended by Robinhood, and it is legally not one of student loans. That may or may not be morally correct or good policy, but it's certainly the current state of the world.

Please don't drag the rest of the world in it,

this student loan construction is certainly the current state of the USA

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

#60

Post by unnameduser1 »

nine_k wrote: post #37
loeg wrote: post #27

Earlier quoted context omitted.

This is pretty tone-deaf.

Please notice how highways are full of warning signs and barriers that prevent you from accidentally running across them. Same with construction sites, or heavy industrial plants. Maybe other risky places should have more warning signs, so that an optimistic 20-yo would have to stop and think before acting.

To give a bit perspective: in many countries there are mostly no warning signs and barriers on highways. Sometimes a few trees, the occasional speed limit sign and warning of steep slopes. Only on places where accidents are so common they add barriers to prevent cars going into oncoming lanes, but that doesn’t prevent accidents from happening.

It’s tragic that the 20yo died, many sites warn that trading is risky. What they shouldn’t allow is to trade with more money than you can prove to possess.

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