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Robinhood and How to Lose Money

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Re: Robinhood and How to Lose Money

#61

Post by Melting_Harps »

WalterBright wrote: post #38
pjc50 wrote: post #22

Earlier quoted context omitted.

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.

> Steady investment will never give you that. Sure it does. I've seen lower middle class people become millionaires that way. Of course, one needs the discipline to not succumb to spending it on a car/house/divorce, and the intestinal fortitude to not panic sell when the market tanks.

> Sure it does. I've seen lower middle class people become millionaires that way. Of course, one needs the discipline to not succumb to spending it on a car/house/divorce, and the intestinal fortitude to not panic sell when the market tanks.

I think he was referring to the adrenaline rush, not the potential to make life changing amounts of money playing the long game, which clearly doesn't yield the same 'rush' he was referring to but is none-the-less an effective strategy.

I'm an unabashed adrenaline junkie: I've been in martial arts, school sports, motorsports, I did regular public speaking engagements for my startup and in academic-based oratory before that, and spent time in high end Kitchens... but with that said, to this day I will never understand the mediocre adrenaline 'hit' you get from gambling. It's really low level stuff to me, like lower than lifting weights or running a mile, something I did regularly at the gym after getting beat up working an 11 hour shift of a busy Dinner service.

I used to play $10 buy-in tourneys of Texas-Hold'em (forced into is more like it) hosted in the living room next to my bedroom when I was in my late teens/early 20s in Motorsports and I often got so bored, even when I won, that I failed to stay in if it went longer than an hour and often asked to take a cut on my pot/payout and forfeit to just get some sleep as I had school and work in the morning.

By contrast my professional driver friends/roommates were up until 5am and one of them played online for high stakes, the other played the stock market on the side and said it felt like the same 'rush,' as a day at the track but I could never relate to either of them as a track day was way more intense for me.

Flash forward to my Bitcoin days and after the initiation you get from from a couple of years in that space with such absurd volatility and all that the drama that follows it is such that nothing really even compares to it anymore, and I wasn't even a day trader, I'm merely an early(ish) adopter so none of this makes any sense to me at all.

What I do know is that this was done for gamblers [1] after COVID and is slowly becoming the norm in legal states that have re-opened due to the demand these, quite frankly addicts, create for the Casino Industry.

I wonder if something like Neuralink could help mitigate these diseases, as it all seems to stem from a neurological/neurotransmitter stimulation/feedback loop. I'm less concerned with the Matrix-style downloading/AI integration and more focused on what it could do for people with severe Depression, Alzheimer's, Parkinson's, and ALS.

1: https://www.highstakesdb.com/10328-covid-19-friendly-blackja...

Re: Robinhood and How to Lose Money

#62

Post by raverbashing »

vmception wrote: post #57
raverbashing wrote: post #43

Earlier quoted context omitted.

If only we had learned something from 2008... But apparently not (For those who aren't aware) The problem with options is that your liability with them can get bigger than your equity. You buy 10 shares of Newthing.js for $1000 ($100/share), the maximum you're losing is $1000 You shortsell NTJS because they use JS instead of Ruby, but guess what NTJS rose to $200 per share and at the time of selling you need to cover…

> For those who aren't aware) The problem with options is that your liability with them can get bigger than your equity. You buy 10 shares of Newthing.js for $1000 ($100/share), the maximum you're losing is $1000 > You shortsell NTJS because they use JS instead of Ruby with a strike price of $90 but guess what NTJS rose to $200 per share and now you're down $110 per option you put (minus the call option sell price).…

> People that know how to control risk don't have this problem, or use those terms.

I am aware of this and I agree that my example is a simplistic one. But it is what seems to be on the mind of most option traders.

> Your risk issue is shortselling an options contract. Not shortselling a stock, which would be the actual opposite of your buying example

You mean this right? https://www.investopedia.com/articles/trading/092613/differe...

Agreed, I think I got that mixed up. Yes, if you're covered for your put option then your liability is limited

Re: Robinhood and How to Lose Money

#63

Post by kjksf »

BoorishBears wrote: post #55
system2 wrote: post #24

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 extr…

People keep saying this and all I can say is, have you used Robinhood AND a "real" brokrage platform? Crashes during periods of high volatility at a much higher rate than competitors, puts detailed views of stock market behind a paywall, actively advertises options with asinine strike/expiries for people who don't get options, no full support for spreads are on their mobile app, their general poor handling of multi l…

Yes, I do use IBKR, which is one the "real" brokerage platforms.

Your portrayal of RobinHood is a caricature.

Crashes? It happened a few times. I'm not an active trader, so I don't use IBKR all the time, but even in my light usage when I couldn't log in because their security-theater activation code never arrives.

Often IBKR can't show the value of my portfolio because, apparently, they can't load the data.

The whole web app is slow, switching between different parts is slow.

They don't even bother to send you an e-mail immediately after fulfilling the order.

The way RobinHood show option pricing makes way more sense than IBKR's view.

"Terrible fills on order" - you're just making stuff up. Care to show evidence that some other brokerage can fill your order faster or at better price than RobinHood.

"IB's trading system had a defect that prevented clients from selling any WTI Futures at negative prices, which caused IB's clients over $100 million in losses." https://finance.yahoo.com/news/sadis-hired-investigate-inter...

I'm sure there were people who lost money and committed suicide and were customers of "real" brokerage platforms.

RobinHood is just a better app. Why do people think it's a bad thing is beyond me.

Re: Robinhood and How to Lose Money

#64

Post by kjksf »

jesterson wrote: post #60
renewiltord wrote: post #30

Earlier quoted context omitted.

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.

> You actually can get better results because as a retail trader participating with other retail traders you have uncorrelated order flow. Hedge funds will get even better results knowing what's robinhooders are betting upon with much better precision.

That doesn't negate his point (that RobinHood can fill your order just as well, or better, than eTrade or Fidelity).

If you're trying to out-hedge hedge funds then the only way to win is to not play.

You can (and should) use stop limit prices to guarantee a desirable price in which case there's nothing a hedge fund can do to bump you.

And if you're sensitive to 0.1% differential in price then you're trading, not investing.

Re: Robinhood and How to Lose Money

#65

Post by QuesnayJr »

BoorishBears wrote: post #55
system2 wrote: post #24

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 extr…

People keep saying this and all I can say is, have you used Robinhood AND a "real" brokrage platform? Crashes during periods of high volatility at a much higher rate than competitors, puts detailed views of stock market behind a paywall, actively advertises options with asinine strike/expiries for people who don't get options, no full support for spreads are on their mobile app, their general poor handling of multi l…

  options with asinine strike/expiries for people who don't get options
I've never used Robinhood, so I was curious what you meant by an "asinine" strike. (I know all about options, FWIW.)

Re: Robinhood and How to Lose Money

#66

Post by pjc50 »

kjksf wrote: post #52
pjc50 wrote: post #22

Earlier quoted context omitted.

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.

Opening a restaurant is riskier than investing in stocks and way more work. Investing in individual stocks (what you call "gambling") is more risky than investing in S&P 500 but that's the trade off. More risk leads to more reward (or more loss). If you invest in AAPL (or AMZN or GOOG or FB or NFLX) at the right time, you will 10x your money in under 10 years. Is investing in any of those companies "gambling"? And su…

Buy-and-hold a major traded company is not gambling. Day trading, and options trading especially, looks a lot more like it.

> yet we're not name calling people who open restaurants "gamblers"

In one of those situations your hard work has a significant influence on the outcome and in the other it has no effect at all.

Re: Robinhood and How to Lose Money

#67

Post by imtringued »

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.

They didn't. The difference between today and a hundred years ago isn't actually in what people did. It's how many people did a certain thing. Back in the day people didn't invest because they were farmers. Nowadays a lot more people live in cities and have a high enough income to invest it and this requires financial services to scale to millions of customers.

Re: Robinhood and How to Lose Money

#68

Post by pjc50 »

WalterBright wrote: post #38
pjc50 wrote: post #22

Earlier quoted context omitted.

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.

> Steady investment will never give you that. Sure it does. I've seen lower middle class people become millionaires that way. Of course, one needs the discipline to not succumb to spending it on a car/house/divorce, and the intestinal fortitude to not panic sell when the market tanks.

> needs the discipline to not succumb to spending it on a car/house/divorce

Apart from the 2008 boom/crash, owning a house has been a great way for the middle class to become asset millionaires. I knew someone in London who was routinely out-earned by the asset appreciation on their own house.

Besides, inflation has rather moved the bar for "millionaire" to every middle class couple with a house and two retirement funds..

Re: Robinhood and How to Lose Money

#69

Post by SpelingBeeChamp »

vmception wrote: post #47
JumpCrisscross wrote: post #39

Earlier quoted context omitted.

> new groups of traders with a low barrier of entry make options much more liquid Are you claiming Robinhood users are responsible for a significant fraction of option market liquidity over the past year? Because that’s categorically wrong.

All additional participants to the options market makes options more liquid. No, I am not quantifying Robinhood users, only elated to see one chisel helping narrow the bid and ask spreads across expiration dates. Shouldn't bother you that much.

I don't know... that's certainly what I thought you were saying, and I don't like being misled.

Re: Robinhood and How to Lose Money

#70

Post by i_cannot_hack »

kjksf wrote: post #59
jariel wrote: post #46

Earlier quoted context omitted.

"People also gamble in Las Vegas, no one is stopping them." If Robin Hood was positioned and sold as 'gambling' and regulated a such, nobody would have a problem with it. But if anyone doesn't see the maximal hypocrisy in their branding (literally: Robin Hood) and the materiality of their offer, then that's the issue right there. By 'gravy' the author means 'fish' in gambling terms. There's just no way kids on their…

In stock market you're not playing against other people, including the "pros". You try to pick companies that will grow in the future. If you pick well, then it doesn't really matter if other people (including "pros") pick the same company or not because there's enough future growth for everybody. And I have much less reverence towards pros than you. The pros were saying that Amazon's valuation is so crazy that even…

> While I'm not playing against the pros, I sure am getting better returns than 90% of them.

How much you're making right now is not relevant for anything other than your personal bank account, the same way that winning a single hand at the poker table is not relevant for anything except your daily winnings.

What is relevant for the rest of us in this context (since we have no stake in your current bank balance) is this: Will you beat the average professional, or better yet an index fund, over a period of 20 years?

In fact, your personal success over 20 years is just as irrelevant, unless a statistically significant amount of people doing the same thing, as a well defined and replicable strategy, achieves similar success.

"I did this thing and made more money than X" is just noise and not indicative of anything.

P.S. Keeping up with, or even beating, the average professional, is easy: just invest in an index fund. So it's a very low bar to achieve.

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