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Amusingly, this is part of why some folks are deeply terrified of Robinhood: with a few clicks here and there, you’ve just bought yourself 10-15x leverage. I a
by boulos 6y ago
Amusingly, this is part of why some folks are deeply terrified of Robinhood: with a few clicks here and there, you’ve just bought yourself 10-15x leverage.
I actually think it’s a great thing to let someone easily try out “let me try out options trading, I’ll start with $100”. The write ups about r/wallstreetbets though are sometimes heartbreaking.
So like you said, at least you know what you don’t know!
- notnap 6y agoWhat are you talking about. Loss porn on r/wsb is great entertainment and scratches the “cautionary tale” itch very well. You can’t say that Robinhood users do that to themselves without consent at this point in time
- dogma1138 6y agoDoes robin hood actually allows you to leverage to the point where the loss is beyond your investment? Usually these platforms close/liquidate the position so the maximum you can lose is the money you bet.
- marvin 6y agoSomeone else can probably answer if Robinhood allows you to sell options short, but if you do, you can lose more than your initial purchase/deposit if the price moves faster than Robinhood can forcibly liquidate your position. You would almost expect this to happen occasionally, if you’re not super careful, due to the massive volatility of options. Being short out-of-the-money call options will expose you to a ridiculous downside if the stock makes an unexpected upwards move. Easily 10x-100x your deposit.
- dogma1138 6y agoThat can happen on quite a few other platform in theory but not in practice basically the platforms assume the risk in that case I remember that form the good ole days of online FX options and binary option trading in the late 2000’s. Basically you always had forced liquidation or some sort of a hedge on the opposite leg that made sure you couldn’t lose more than the leveraged amount you’ve bet on.