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Uhm, what? That's still fully secured. It's actually 4/3rds secured, not 1/3rds. If you have $1000 in your account and borrow $2000 to buy stocks, you've got $3
by ThrustVectoring 10y ago
Uhm, what? That's still fully secured. It's actually 4/3rds secured, not 1/3rds. If you have $1000 in your account and borrow $2000 to buy stocks, you've got $3000 worth of stocks that they can sell to cover a $2000 loan. Whenever this ratio goes near or below 1, they can sell the secured stocks to cover it.
- jbooth 10y agoIf the stocks (or wacky option/derivative trade) still have value, then yeah, there's no problem. The problem is when people make a bet that doesn't work out. There are a lot of exotic trades that can clean you out completely in an instant if you bet wrong.
- jfim 10y agoIt doesn't even need exotic trades. If you're doing margin trading on a stock for which there is a sudden dip in stock price (as in previous flash crashes), then there will be a margin call and from the customer's perspective, all their money and shares will evaporate. I wonder how Robinhood will handle it when it happens.