Earlier quoted context omitted.
Margin trading is a pretty standard feature across all brokerages. Dangerous if used ignorantly, but greatly increases you returns if used effectively.
And regulated - you have to be approved for margin trading by the brokerage.
Robinhood stock trading app confirms $110M raise at $1.3B valuation
91–100 of 394 posts
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#92This 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.
How is that different from the dozens of other offerings from other brokers? Margin lending has been around for centuries, binary options on the other hand..
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#93Earlier quoted context omitted.
> Even if you are a professional trader you'll take a bath on margin over the long run. Huh? It would be difficult to find a professional trader that doesn't trade equities on margin. They pretty much have to due to the way the settlement process works. The returns of a professional trader depend on many factors, including available capital and the capacity or manner in which the trader operates. That said, they're…
> Professional traders presumably make their living trading, so their returns far exceed 5%. In theory, sure. But most do not "far exceed 5%", and instead have the fees of their employing funds to subsidize their strategies. For traders who are working independently, or in prop shops, I suppose it might be true by definition (if they last in the market they are either re-upping and gambling, or at least profitable).…
>More importantly, retail investors are not professionals, and Robinhood is basically catering to /r/wallstreetbets with this sort of product offered to them.
I agree with this and never asserted anything to the contrary. The scope of my reply was addressing a single point concerning margin in context of professional traders.
Also, the statment that most returns "far exceed 5%" probably wasn't the best choice of words. I've edited my original post accordingly.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#94“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…
> Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong?
This is the hallmark of modern day capitalism. By issuing loans knowing full well they will never pay back, you can collude with banks to threaten to kill the economy when the government hesitates about cutting them a cheque.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#95If Robinhood bundles user debt and sells it at varying ratings (depending on information about the stocks being bought, perhaps) they could protect themselves from a large default and probably make money doing it
It wouldn't necessarily protect them. Typically the broker sells off your shares/etfs on your behalf before they are owed anything net over your account deposit or margin.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#96> Robinhood also earns money from rebates its gets for directing its order flow to broker dealers, though Bhatt insists “We do not sell data to anyone. We have never sold data to anyone. We just do not do that.” Just so everyone knows, order flow from unsophisticated investors is considered a valuable resource because, when filling it, you know that you're more informed than the person trading against you.
I don't think that's a very good way of putting it. I'd say its more correct to say orders from retail investors are valuable because: 1) They tend to be a relatively equal number of buys and sells. This is figurative manna from heaven for market makers 2) They don't mind crossing the spread, also a gift for market makers. 3) They can't really move the spread and probably least importantly...... 4) they aren't tradin…
Retail investors are essentially paying a few pennies more per share in order to trade commission free. I think that's a good deal.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#97“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…
Doesn't most brokers already provide up to 7 to 10 time leverage for intraday and 2 to 3 times for future? Atleast in india every broker provides that.
In the US, most retail investors are limited to 2x leverage for new positions, and 4x leverage for existing positions. This is the "Reg T" margin system. If you qualify for the "Portfolio Margin" system (usually offered to customers with account values greater than 100k or 250k), you can do up to 6.66x leverage in a stock-only position.
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#98[deleted]
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#99“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…
Depends what you want to do, I'm about 98% in plain old, boring index-tracking ETFs. But sometimes I want to take a bit of money to make some stupid bet. Yes, to gamble. And for that purpose, often having the leverage is a good thing. The way I see it, the bets are much more entertaining than those at casinos and with better odds. Maybe it's just me, but I find casinos incredibly boring, but gambling on the market ca…
What are returns like on "boring index-tracking ETFs"?
Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation
#100Earlier quoted context omitted.
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.
Actually, if your investments fall in value to the point where it looks like your account is in danger of becoming insolvent, they'll likely immediately sell as many of your assets as it takes to make up the difference, locking in your leveraged losses. This is known as a margin call, and it's very unpleasant to be on the receiving end of one.
The actual risk to the broker is minimal -- they just have to make sure to trigger the sale at a point where the value of all of your holdings (not just what you purchased on margin) is still greater than what you owe them.