5 ms·
Casinos do not make money on borrowing for gambling, but on gambling.
by azag0 9y ago
Casinos do not make money on borrowing for gambling, but on gambling.
- brianwawok 9y agoIt 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.
- user5994461 9y agoCasino 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.
- koolba 9y agoThey 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.
- kcorbitt 9y agoActually, 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.
- kgwgk 9y agoI think you may end owing money to the broker, if the margin call cannot be executed in a clean way. That has to be even more unpleasant.
- koolba 9y agoExactly. They have the right to liquidate to protect themselves at any time and if it doesn't cover your margin, your still on the hook for the rest.
- sigstoat 9y ago> Robinhood is effectively lending money with little guarantee to take anything back and no source of income. i have not looked into robinhood's margin offering, so maybe it's very different, but in my other brokerage accounts, margin works something like this: i buy $10k of SPY. after the trade closes, the broker says "ok, you own $10k of SPY, and that's good for another $5k of margin." so then i can go buy another $5k of whatever i want. i pay 9% interest or so on that $5k. if SPY drops in value "enough", the broker can on a moment's notice, sell as much of the SPY as they want to cover my debts. so... they've got a great guarantee they can take it all back.
- kogepathic 9y ago> so... they've got a great guarantee they can take it all back. And what of the case where the value of your SPY position falls below your $5k+interest debt to them? Edit: derp. A margin call would cover this.
- deleted 9y ago[deleted]
- deepGem 9y agoReminds me of Owning Mahowny
- aeorgnoieang 9y agoI would expect that they also make money on borrowing for gambling. How do you know that they don't?
- akhatri_aus 9y agoThe difference is Casinos are your effective counterparty and not a marketplace.
- aphextron 9y ago>Casinos do not make money on borrowing for gambling, but on gambling. That's completely false. Casinos are huge money lenders.
- FireBeyond 9y agohttps://wynn.nccreports.com/ https://wynn.nccreports.com/ Pretty common.