7 ms·

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 em

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 on their game.

bryananderson 6y ago
There is not an equal probability of a day trader making 700k and losing 700k trading options. Market makers won’t demonize day trading—the “new blood” are their best marks.
- smabie 6y ago
  The efficient market hypothesis says otherwise. If it was easier to lose money (ignoring trading costs and spreads) than it was to make money, I could easily beat the market by doing the opposite of the average joe loser.
  - nine_k 6y ago
    That could also be problematic: you mighth need to know what the average joe loser does instantly, or maybe even before the fact, to turn an actual profit. Though doing the contrarian move is sort of common wisdom: "sell when everyone is buying, buy when everyone is selling", of course if you understand what to sell/buy in either case.
    - hetman 6y ago
      I think you're right. By the time you know what everyone is buying/selling with any certainty, the boat has already sailed.
      - toast0 6y ago
        I mean, if you just want to be contrarian, watch your holdings for what's going up over whatever period, and sell that --- that's what everyone is buying. Look over the whole market for whst is going down, and buy that, that's what everyone is selling. Every finance information outlet ever tells you the day/month/year's biggest winners and losers, and most people aren't watching that and taking the contrarian position, or the winners and losers would be pretty boring.
    - klyrs 6y ago
      > you mighth need to know what the average joe loser does instantly, or maybe even before the fact, to turn an actual profit. As in, run a day trading service and analyze anonymized trading data?
      - hcknwscommenter 6y ago
        There was an SEC enforcement action a few years ago where they went against a platform trading company that catered to especially unsophisticated and risk taking clientele. They never actually put on any of the trades their clients were "making." They just pocketed the money and when the clients inevitably lost it all, the outcome was the same for the client.
        webmaven 6y ago
        > They never actually put on any of the trades their clients were "making." They just pocketed the money and when the clients inevitably lost it all, the outcome was the same for the client. Whoa. That is so elegant in it's simplicity. Evil, certainly, but elegant. And now I'm imagining more elaborate versions that incorporate the Baltimore Stockbroker scam to convince the clients to invest (and lose) even more money...
  - alpineidyll3 6y ago
    You can't even take the short side of a spx put with less than a US Lifetime income of capital. No one makes money on symmetrical markets, and they therefore are unpopular.
  - peteretep 6y ago
    This was interesting to think about. I think the efficient market hypothesis implies only that a random selection of stocks is equally likely to be market beating rather than market performing. $5 of imaginary internet money says this poor dude was on a Telegram group telling him what to buy and sell
  - deleted 6y ago
    [deleted]
  - nostrademons 6y ago
    There are firms that do exactly this. Robinhood's business model is to sell the order-flow data of its users to HFT hedge funds, who then take the opposite side of the trade. It's proven very profitable both for Robinhood and for funds that do this.
    - Ghjklov 6y ago
      Why is that okay for them to do that? Genuinely curious.
      - nostrademons 6y ago
        It's a dark pattern, but there's nothing illegal about it. Their privacy policy states "We may also share information with others in an aggregated or otherwise anonymized form that does not reasonably identify you directly as an individual." Knowing that there exists someone who is about to buy TSLA does not identify that person, and yet is still incredibly useful to a market-maker. Selling data you've collected (without identities attached) is legal and largely unregulated. And the actual transaction is an ordinary B2B customer relationship. Amazingly, a significant number of Robinhood customers are aware that they do this and don't care.
        konamicode 6y ago
        If I am a Robinhood customer who is investing for the long term instead of day trading - should I care?
        huac 6y ago
        not investment advice: no, you shouldn't. the spreads you get can be tighter (good when you want to buy and sell), and any hypothetical front running of your order would lead to miniscule slippage over the long-run. buying SPY and TLT is more or less the same experience in robinhood as it is in schwab, TDA, etc. even as a day trader i wonder if it matters. i would be more annoyed that RH doesn't allow options on indices or futures, which leads to RH traders loading up on similar-but-not-identical products (eg USO as a substitute for oil futures or whatever VIX etf's remain standing)
  - AlchemistCamp 6y ago
    The efficient market hypothesis says nothing of the sort. Upside and downside with options aren't symmetrical. Unlike when purchasing long positions in stocks, when trading options it's possible to lose many times more money than you initially put in. You also really can't ignore the spreads. Market makers win pretty consistently and everyone else is playing a worse than zero-sum game.
    - BeeOnRope 6y ago
      They are symmetric in the sense that you can both buy and sell options, so whatever payoff curve you get e.g., by buying an option (say unlimited downside and fixed upside) you can sell the same option to get the mirrored outcome (unlimited upside, fixed downside).
    - brockwhittaker 6y ago
      Adjusted for probability, upside and downside are theoretically the same with options. > Unlike when purchasing long positions in stocks, when trading options it's possible to lose many times more money than you initially put in. The converse is also true. It’s entirely possible to almost guarantee yourself a tiny profit and almost no downside risk as it is to create infinite risk. So EMH definitely maps to the options market.
      - AlchemistCamp 6y ago
        The market is (mostly) efficient but that doesn't mean that the same number of people end up ahead a certain number of dollars as behind. In a zero-sum game, it's entirely possible and common to have a small number of comparatively large winners and a large number of losers.
    - mD5pPxMcS6fVWKE 6y ago
      It's the other way around. With stocks, you can take loans and trade on margin. If something happens, like very large gap down in the morning, and they can't unwind your position quickly, you could end up in debt. It's a very rare situation in practice. With options, you can only lose what you have invested. Unless you write naked options, which I am almost sure is not allowed on Robinhood.
  - pnako 6y ago
    It's trivial to lose money by trading outside of the efficient frontier.
  - ohyes 6y ago
    The warren buffets and medallion funds of the world have much better information and resources that Joe Loser. EMH just says that all the publicly known information is priced in almost instantaneously... It doesn't say much about how that profit from those price changes are distributed. It also says nothing about non public information. Unfortunately you're competing with a bunch of motivated people who have access and analysis techniques that you simply do not have, and this data gets priced in by them exploiting their information and analysis to make trades which alter the price of the market to represent the true value. In a very roundabout way, EMH says, people with access to information will perform arbitrage trades based on that information as soon as it is available. If you are not those people, you will just have to ride the rising market.
  - waste_monk 6y ago
    You occasionally hear of people making money by trading the inverse of what's popular on reddit's /r/wallstreetbets community. So I'd believe it.
  - marketgod 6y ago
    You can easily beat the market using the wheel at a minimum but the time investment/return aren't ideal. There are posts below that will decry listen to Buffet and others however their accounts are so large listening to them is a disservice to yourself. Also the larger players have larger trades so their strategies are much different from a regular trader and there are lots of places for small accounts (under $5m) to make money.
- Ghjklov 6y ago
  But the possibility exists. That you can make money by simply trading stocks, without actually putting much in too much work and time (outside of research and education). I have a hunch, just a feeling, that the powers that be prefer that we normal people not know about how they make money by simply trading around stocks with excess money they have laying around.
  - lazyasciiart 6y ago
    Nonsense, they advertise lotteries everywhere.
    - Ghjklov 6y ago
      Lotteries aren't really the same thing as holding shares in a company.
adsfgnionio 6y ago
>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.
- arminiusreturns 6y ago
  The entire financial market is gambling, it's just a matter of degree of risk, and the higher the risk the higher possible return. People need to stop fooling themselves otherwise.
  - chii 6y ago
    investing in a business (buying stocks) is not the same as speculating. Options trading is speculative in nature, because for someone to "win", someone else has to lose. That is not the case for stock purchases - the stock appreciates in value because the business it represents appreciated in value. Just because something has risk, doesn't automatically make it gambling.
    - frank2 6y ago
      >for someone to "win", someone else has to lose Not necessarily: farmers use options as a kind of "price insurance" to insulate themselves from changes in the price of their crop between now and when they are ready to sell it. Yes, for one party in an options trade to gain X dollars the other party must lose X dollars, but both parties can gain in what the economists and decision theorists call expected utility. We have all heard the saying that after a person's income reaches $80,000 or so per year, further increases in income don't improve happiness as much as the previous increases. In other words, a person's utility function is not a linear function of income, but rather the curve flattens out a little after about $80,000 a year. Similarly, just because an options trade is zero-sum in dollars doesn't mean it is zero-sum in the utility conferred on the two parties to the trade.
      - dx034 6y ago
amiga_500 6y ago
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.
- logicchains 6y ago
  >Because speculative trading is a zero sum game, it creates no wealth. Speculative trading is a key component of markets. People speculate that X is undervalued, so they invest in X, this gives X more resources, so resources are allocated based on what people think has most potential for growth. People who continuously make bad predictions get filtered out of the market, so "what people think has most potential for growth" comes to approximate "what has most potential for growth", and we get efficient resource allocation.
  - amiga_500 6y ago
    It's the secondary market. Companies get nothing on a bet they win or lose. People betting on a soccer game have zero effect on the future of soccer.
    - logicchains 6y ago
      Secondary markets can definitely influence the price of the underlying asset, especially if they're more liquid.
      - amiga_500 6y ago
        Derivatives? Do Barcelona change their tactics because I keep winning big on the first goal scorer? This is a socially useless activity. Stop trying to force it.
- Ghjklov 6y ago
  I agree
- wpietri 6y ago
BoorishBears 6y ago
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.
- deleted 6y ago
  [deleted]
- gruez 6y ago
  >If Robinhood was really about doing what it claims to do, the app would have 3 tickers, QQQ, SPY, and DIA. Is that what robinhood is supposed to be? A conservative retirement savings portfolio? Sure, the app store tagline says "Invest. Save. Earn.", but the listing also mentions highly speculative instruments like cryptocurrency and derivatives. It also promises access to "real-time market data" and "relevant news articles" which is only needed when you're taking on an active management style. Clearly the app isn't designed as something you chuck money into now, and withdraw a few decades later. >By it's very nature, the people who end up in Robinhood, who wouldn't be able to get "into" other brokrages The reason why they wouldn't "get into" the other brokerages is because they transact in such small amounts that they'll lose most of their capital on trading fees. I don't see anything wrong with letting people make small trades that they wouldn't have otherwise been able to make. >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. How about we let the users take personal responsibility? I like Matt Levine's idea of "Certificate of Dumb Investment". Disclose the risks to them, and let them do whatever they want. https://www.bloomberg.com/opinion/articles/2018-09-24/earning-the-right-to-get-swindled https://www.bloomberg.com/opinion/articles/2018-09-24/earnin...
wdr1 6y ago
He wasn't a professional trader or anything like that. He was a kid with no income. Was they did they allow him access to so much leverage?
- def8cefe 6y ago
  Guessing it's related to a bug on the platform from last year. https://www.bloomberg.com/news/articles/2019-11-05/robinhood-has-a-glitch-that-gives-traders-infinite-leverage https://www.bloomberg.com/news/articles/2019-11-05/robinhood...
- BoorishBears 6y ago
  It's now coming out that he didn't have access to that kind of leverage. Robinhood will show one leg of a multi-leg options strategy as your balance in certain cases. So you have theoretically sold 700k in calls, but it's covered by a near equal amount of options being bought, there is no scenario in which you could actually owe 700k Yet Robinhood's engineers didn't properly implement the feature, so their account balance showed the calls as if they had been sold naked, resulting in -700k as a balance.
  - manigandham 6y ago
    There's nothing to implement differently, this is how all brokers show it because one leg might be exercised anytime, and if it happens before the broker executes the other side you will see a big discrepancy in your account. It's up to you to understand your trades.
yongjik 6y ago
> On the flip side, if this trader instead made 700k on options, he'd be celebrated as a hero ... Wait, what, why would I celebrate someone who basically went to a casino and hit a jackpot, and what the hell does that have to do with empowering anyone other than casino owners.
monksy 6y ago
The market doesn't care about your age or identity.

bryananderson 6y ago

There is not an equal probability of a day trader making 700k and losing 700k trading options. Market makers won’t demonize day trading—the “new blood” are their best marks.

smabie 6y ago
The efficient market hypothesis says otherwise. If it was easier to lose money (ignoring trading costs and spreads) than it was to make money, I could easily beat the market by doing the opposite of the average joe loser.
- nine_k 6y ago
  That could also be problematic: you mighth need to know what the average joe loser does instantly, or maybe even before the fact, to turn an actual profit. Though doing the contrarian move is sort of common wisdom: "sell when everyone is buying, buy when everyone is selling", of course if you understand what to sell/buy in either case.
  - hetman 6y ago
    I think you're right. By the time you know what everyone is buying/selling with any certainty, the boat has already sailed.
    - toast0 6y ago
      I mean, if you just want to be contrarian, watch your holdings for what's going up over whatever period, and sell that --- that's what everyone is buying. Look over the whole market for whst is going down, and buy that, that's what everyone is selling. Every finance information outlet ever tells you the day/month/year's biggest winners and losers, and most people aren't watching that and taking the contrarian position, or the winners and losers would be pretty boring.
  - klyrs 6y ago
    > you mighth need to know what the average joe loser does instantly, or maybe even before the fact, to turn an actual profit. As in, run a day trading service and analyze anonymized trading data?
    - hcknwscommenter 6y ago
      There was an SEC enforcement action a few years ago where they went against a platform trading company that catered to especially unsophisticated and risk taking clientele. They never actually put on any of the trades their clients were "making." They just pocketed the money and when the clients inevitably lost it all, the outcome was the same for the client.
      - webmaven 6y ago
        > They never actually put on any of the trades their clients were "making." They just pocketed the money and when the clients inevitably lost it all, the outcome was the same for the client. Whoa. That is so elegant in it's simplicity. Evil, certainly, but elegant. And now I'm imagining more elaborate versions that incorporate the Baltimore Stockbroker scam to convince the clients to invest (and lose) even more money...
- alpineidyll3 6y ago
  You can't even take the short side of a spx put with less than a US Lifetime income of capital. No one makes money on symmetrical markets, and they therefore are unpopular.
- peteretep 6y ago
  This was interesting to think about. I think the efficient market hypothesis implies only that a random selection of stocks is equally likely to be market beating rather than market performing. $5 of imaginary internet money says this poor dude was on a Telegram group telling him what to buy and sell
- deleted 6y ago
  [deleted]
- nostrademons 6y ago
  There are firms that do exactly this. Robinhood's business model is to sell the order-flow data of its users to HFT hedge funds, who then take the opposite side of the trade. It's proven very profitable both for Robinhood and for funds that do this.
  - Ghjklov 6y ago
    Why is that okay for them to do that? Genuinely curious.
    - nostrademons 6y ago
      It's a dark pattern, but there's nothing illegal about it. Their privacy policy states "We may also share information with others in an aggregated or otherwise anonymized form that does not reasonably identify you directly as an individual." Knowing that there exists someone who is about to buy TSLA does not identify that person, and yet is still incredibly useful to a market-maker. Selling data you've collected (without identities attached) is legal and largely unregulated. And the actual transaction is an ordinary B2B customer relationship. Amazingly, a significant number of Robinhood customers are aware that they do this and don't care.
      - konamicode 6y ago
        If I am a Robinhood customer who is investing for the long term instead of day trading - should I care?
        huac 6y ago
        not investment advice: no, you shouldn't. the spreads you get can be tighter (good when you want to buy and sell), and any hypothetical front running of your order would lead to miniscule slippage over the long-run. buying SPY and TLT is more or less the same experience in robinhood as it is in schwab, TDA, etc. even as a day trader i wonder if it matters. i would be more annoyed that RH doesn't allow options on indices or futures, which leads to RH traders loading up on similar-but-not-identical products (eg USO as a substitute for oil futures or whatever VIX etf's remain standing)
- AlchemistCamp 6y ago
  The efficient market hypothesis says nothing of the sort. Upside and downside with options aren't symmetrical. Unlike when purchasing long positions in stocks, when trading options it's possible to lose many times more money than you initially put in. You also really can't ignore the spreads. Market makers win pretty consistently and everyone else is playing a worse than zero-sum game.
  - BeeOnRope 6y ago
    They are symmetric in the sense that you can both buy and sell options, so whatever payoff curve you get e.g., by buying an option (say unlimited downside and fixed upside) you can sell the same option to get the mirrored outcome (unlimited upside, fixed downside).
  - brockwhittaker 6y ago
    Adjusted for probability, upside and downside are theoretically the same with options. > Unlike when purchasing long positions in stocks, when trading options it's possible to lose many times more money than you initially put in. The converse is also true. It’s entirely possible to almost guarantee yourself a tiny profit and almost no downside risk as it is to create infinite risk. So EMH definitely maps to the options market.
    - AlchemistCamp 6y ago
      The market is (mostly) efficient but that doesn't mean that the same number of people end up ahead a certain number of dollars as behind. In a zero-sum game, it's entirely possible and common to have a small number of comparatively large winners and a large number of losers.
  - mD5pPxMcS6fVWKE 6y ago
    It's the other way around. With stocks, you can take loans and trade on margin. If something happens, like very large gap down in the morning, and they can't unwind your position quickly, you could end up in debt. It's a very rare situation in practice. With options, you can only lose what you have invested. Unless you write naked options, which I am almost sure is not allowed on Robinhood.
- pnako 6y ago
  It's trivial to lose money by trading outside of the efficient frontier.
- ohyes 6y ago
  The warren buffets and medallion funds of the world have much better information and resources that Joe Loser. EMH just says that all the publicly known information is priced in almost instantaneously... It doesn't say much about how that profit from those price changes are distributed. It also says nothing about non public information. Unfortunately you're competing with a bunch of motivated people who have access and analysis techniques that you simply do not have, and this data gets priced in by them exploiting their information and analysis to make trades which alter the price of the market to represent the true value. In a very roundabout way, EMH says, people with access to information will perform arbitrage trades based on that information as soon as it is available. If you are not those people, you will just have to ride the rising market.
- waste_monk 6y ago
  You occasionally hear of people making money by trading the inverse of what's popular on reddit's /r/wallstreetbets community. So I'd believe it.
- marketgod 6y ago
  You can easily beat the market using the wheel at a minimum but the time investment/return aren't ideal. There are posts below that will decry listen to Buffet and others however their accounts are so large listening to them is a disservice to yourself. Also the larger players have larger trades so their strategies are much different from a regular trader and there are lots of places for small accounts (under $5m) to make money.
Ghjklov 6y ago
But the possibility exists. That you can make money by simply trading stocks, without actually putting much in too much work and time (outside of research and education). I have a hunch, just a feeling, that the powers that be prefer that we normal people not know about how they make money by simply trading around stocks with excess money they have laying around.
- lazyasciiart 6y ago
  Nonsense, they advertise lotteries everywhere.
  - Ghjklov 6y ago
    Lotteries aren't really the same thing as holding shares in a company.

adsfgnionio 6y ago

>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.

arminiusreturns 6y ago
The entire financial market is gambling, it's just a matter of degree of risk, and the higher the risk the higher possible return. People need to stop fooling themselves otherwise.
- chii 6y ago
  investing in a business (buying stocks) is not the same as speculating. Options trading is speculative in nature, because for someone to "win", someone else has to lose. That is not the case for stock purchases - the stock appreciates in value because the business it represents appreciated in value. Just because something has risk, doesn't automatically make it gambling.
  - frank2 6y ago
    >for someone to "win", someone else has to lose Not necessarily: farmers use options as a kind of "price insurance" to insulate themselves from changes in the price of their crop between now and when they are ready to sell it. Yes, for one party in an options trade to gain X dollars the other party must lose X dollars, but both parties can gain in what the economists and decision theorists call expected utility. We have all heard the saying that after a person's income reaches $80,000 or so per year, further increases in income don't improve happiness as much as the previous increases. In other words, a person's utility function is not a linear function of income, but rather the curve flattens out a little after about $80,000 a year. Similarly, just because an options trade is zero-sum in dollars doesn't mean it is zero-sum in the utility conferred on the two parties to the trade.
    - dx034 6y ago

amiga_500 6y ago

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.

logicchains 6y ago
>Because speculative trading is a zero sum game, it creates no wealth. Speculative trading is a key component of markets. People speculate that X is undervalued, so they invest in X, this gives X more resources, so resources are allocated based on what people think has most potential for growth. People who continuously make bad predictions get filtered out of the market, so "what people think has most potential for growth" comes to approximate "what has most potential for growth", and we get efficient resource allocation.
- amiga_500 6y ago
  It's the secondary market. Companies get nothing on a bet they win or lose. People betting on a soccer game have zero effect on the future of soccer.
  - logicchains 6y ago
    Secondary markets can definitely influence the price of the underlying asset, especially if they're more liquid.
    - amiga_500 6y ago
      Derivatives? Do Barcelona change their tactics because I keep winning big on the first goal scorer? This is a socially useless activity. Stop trying to force it.
Ghjklov 6y ago
I agree
wpietri 6y ago

BoorishBears 6y ago

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.

deleted 6y ago
[deleted]
gruez 6y ago
>If Robinhood was really about doing what it claims to do, the app would have 3 tickers, QQQ, SPY, and DIA. Is that what robinhood is supposed to be? A conservative retirement savings portfolio? Sure, the app store tagline says "Invest. Save. Earn.", but the listing also mentions highly speculative instruments like cryptocurrency and derivatives. It also promises access to "real-time market data" and "relevant news articles" which is only needed when you're taking on an active management style. Clearly the app isn't designed as something you chuck money into now, and withdraw a few decades later. >By it's very nature, the people who end up in Robinhood, who wouldn't be able to get "into" other brokrages The reason why they wouldn't "get into" the other brokerages is because they transact in such small amounts that they'll lose most of their capital on trading fees. I don't see anything wrong with letting people make small trades that they wouldn't have otherwise been able to make. >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. How about we let the users take personal responsibility? I like Matt Levine's idea of "Certificate of Dumb Investment". Disclose the risks to them, and let them do whatever they want. https://www.bloomberg.com/opinion/articles/2018-09-24/earning-the-right-to-get-swindled https://www.bloomberg.com/opinion/articles/2018-09-24/earnin...

wdr1 6y ago

He wasn't a professional trader or anything like that. He was a kid with no income. Was they did they allow him access to so much leverage?

def8cefe 6y ago
Guessing it's related to a bug on the platform from last year. https://www.bloomberg.com/news/articles/2019-11-05/robinhood-has-a-glitch-that-gives-traders-infinite-leverage https://www.bloomberg.com/news/articles/2019-11-05/robinhood...
BoorishBears 6y ago
It's now coming out that he didn't have access to that kind of leverage. Robinhood will show one leg of a multi-leg options strategy as your balance in certain cases. So you have theoretically sold 700k in calls, but it's covered by a near equal amount of options being bought, there is no scenario in which you could actually owe 700k Yet Robinhood's engineers didn't properly implement the feature, so their account balance showed the calls as if they had been sold naked, resulting in -700k as a balance.
- manigandham 6y ago
  There's nothing to implement differently, this is how all brokers show it because one leg might be exercised anytime, and if it happens before the broker executes the other side you will see a big discrepancy in your account. It's up to you to understand your trades.

yongjik 6y ago

> On the flip side, if this trader instead made 700k on options, he'd be celebrated as a hero ... Wait, what, why would I celebrate someone who basically went to a casino and hit a jackpot, and what the hell does that have to do with empowering anyone other than casino owners.

monksy 6y ago

The market doesn't care about your age or identity.