5 ms·

The stock market is turning more and more into a casino. Investing is being gamified causing an addiction that is similar to what you see with gambling addicts.

by janmo 6y ago

The stock market is turning more and more into a casino. Investing is being gamified causing an addiction that is similar to what you see with gambling addicts. People just can't stop putting their money on risky bets in order get an adrenaline kick. Brokers are also incentivized to sell risky products such as options as those are the ones that generate the highest revenues.

waketheFup 6y ago
was just about to say the same. casino "winners" are those who walk away after hitting a lucky streak.
gogopuppygogo 6y ago
It was always a casino. It was also always rigged.
- janmo 6y ago
  I think it has reached a whole new level
deleted 6y ago
[deleted]
dkislyuk 6y ago
An idea as old as the stock market itself. And yet, decades later, it is still the engine for raising capital. (1978) The Gambling Fever On Stock Exchanges [1] (1986) Capitalism's Casino [2] (1989) THE STOCK MARKET FROM THE ROARING '80S TO THE SOBER '90S [3] (1993) How Clinton's Stimulus Plan Cuts Into Deficit; Stock Market Casino [4] (1995) Are Stock Markets Costly Casinos? [5] (1999) The Wall Street Casino [6] (2002) Nasdaq 'Casino' Had Few Safeguards [7] (2011) Gambler or Investor? The Truth About Why We Trade [8] (2014) The Big Casino [9] (2015) The stock market is a 'dangerous casino' that's disconnected from the real economy [10] (2020) When Did the Stock Market Become a Casino? [11] --- [1] https://www.washingtonpost.com/archive/business/1978/09/07/the-gambling-fever-on-stock-exchanges/cb825bf2-f0e5-4bf3-96c3-a61579b2f3fa/ https://www.washingtonpost.com/archive/business/1978/09/07/t... [2] https://www.washingtonpost.com/archive/business/1986/10/08/capitalisms-casino/ff1d40c8-b84f-448a-a1ab-0a9c7ff5a6fd/ https://www.washingtonpost.com/archive/business/1986/10/08/c... [3] https://www.washingtonpost.com/archive/business/1989/12/31/the-stock-market-from-the-roaring-80s-to-the-sober-90s/8f5858ec-18eb-4eb0-a822-3ba2bc2c0cdf/ https://www.washingtonpost.com/archive/business/1989/12/31/t... [4] https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-stimulus-plan-cuts-into-deficit-stock-market-casino-123593.html https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-s... [5] https://core.ac.uk/download/pdf/80562055.pdf https://core.ac.uk/download/pdf/80562055.pdf [6] https://www.nytimes.com/1999/08/23/opinion/the-wall-street-casino.html https://www.nytimes.com/1999/08/23/opinion/the-wall-street-c... [7] https://www.washingtonpost.com/archive/politics/2002/11/11/nasdaq-casino-had-few-safeguards/fe3b07d3-e400-41ce-9a0f-8f27d765d84d/ https://www.washingtonpost.com/archive/politics/2002/11/11/n... [8] https://www.wsj.com/articles/SB10001424052702303499204576388151661037330 https://www.wsj.com/articles/SB10001424052702303499204576388... [9] http://www.dollarsandsense.org/archives/2014/0514orr.html http://www.dollarsandsense.org/archives/2014/0514orr.html [10] https://www.businessinsider.com/the-stock-market-is-a-dangerous-casino-2015-10 https://www.businessinsider.com/the-stock-market-is-a-danger... [11] https://stocksandcoffee.com/stock-market-casino/ https://stocksandcoffee.com/stock-market-casino/
dhuk_2018 6y ago
Holding a single options contract is no more or less risky than holding 100 shares of that same underlying stock... if you know what you are doing. The problem is, people don't know what they're doing and make oversized trades that get them into trouble.
zarkov99 6y ago
Its always been like that, though admittedly Robin Hood has made the link even more transparent. I do not think that is the whole story or even the main story though. If you have a bit of savings today, there simply is no other place to put it in and if you just keep it in cash you are 100% guaranteed a negative return.
- beezle 6y ago
  Negative return wrt inflation. Of course, you could buy TIPS and earn the inflation rate and perhaps some spread over, ie a 'real' return.
beezle 6y ago
No trade is that far removed from gambling. There is always risk of some type. Trading at the professional level in virtually all underlying markets has become 'one way'. There are few, if any, market makers left. Everyone is now a prop trader, aka punter, though some will try to deny it saying they have 'models' or 'systems' and not just instinct. Of course, many gamblers also have models and systems and it is not uncommon for professional traders to also be big casino/sports gamblers. Less talked about is the ever shorter time horizon of what even still pass as investments. The shorter the holding period, the more likely the nature of the trade was more akin to a gamble than an investment. To your other point, brokers don't "sell" options or other risky products to anyone anymore. The idea of someone calling you up on the phone and suggesting you buy 100 lots of OTM calls on TSLA is quaint at best. What brokers do do is make available products through their trading platforms that private 'investors' may trade after signing off on the appropriate paperwork (for instance, an options or futures agreement). Brokers are not going to check too hard to see if you lied about your knowledge of the prodcuts (and hence the 'suitability') as it is you, not them, who are going to make the trade/investment. As to the financial aspect, brokers today have raced to the bottom with zero commisions on most products in exchange for selling order flow to other market participants. While it is certainly possible that in some cases the revenue from selling options trades is higher than equities, on the whole it is probably on a par. Robinhood averages $0.00026 per $1 of trade value for equities from Citadel. They average $0.50 per contract on the option side. So 1000 shares of a $50 stock gives $13 vs say 10 contracts giving $5. While 100 contracts might be more revenue, a 100 lot trade is probably a very cheap option with narrow(er) spread and not likely to get Robinhood $0.50/contract.

by janmo 6y ago

waketheFup 6y ago

was just about to say the same. casino "winners" are those who walk away after hitting a lucky streak.

gogopuppygogo 6y ago

It was always a casino. It was also always rigged.

janmo 6y ago
I think it has reached a whole new level

deleted 6y ago

[deleted]

dkislyuk 6y ago

An idea as old as the stock market itself. And yet, decades later, it is still the engine for raising capital. (1978) The Gambling Fever On Stock Exchanges [1] (1986) Capitalism's Casino [2] (1989) THE STOCK MARKET FROM THE ROARING '80S TO THE SOBER '90S [3] (1993) How Clinton's Stimulus Plan Cuts Into Deficit; Stock Market Casino [4] (1995) Are Stock Markets Costly Casinos? [5] (1999) The Wall Street Casino [6] (2002) Nasdaq 'Casino' Had Few Safeguards [7] (2011) Gambler or Investor? The Truth About Why We Trade [8] (2014) The Big Casino [9] (2015) The stock market is a 'dangerous casino' that's disconnected from the real economy [10] (2020) When Did the Stock Market Become a Casino? [11] --- [1] https://www.washingtonpost.com/archive/business/1978/09/07/the-gambling-fever-on-stock-exchanges/cb825bf2-f0e5-4bf3-96c3-a61579b2f3fa/ https://www.washingtonpost.com/archive/business/1978/09/07/t... [2] https://www.washingtonpost.com/archive/business/1986/10/08/capitalisms-casino/ff1d40c8-b84f-448a-a1ab-0a9c7ff5a6fd/ https://www.washingtonpost.com/archive/business/1986/10/08/c... [3] https://www.washingtonpost.com/archive/business/1989/12/31/the-stock-market-from-the-roaring-80s-to-the-sober-90s/8f5858ec-18eb-4eb0-a822-3ba2bc2c0cdf/ https://www.washingtonpost.com/archive/business/1989/12/31/t... [4] https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-stimulus-plan-cuts-into-deficit-stock-market-casino-123593.html https://www.nytimes.com/1993/02/28/opinion/l-how-clinton-s-s... [5] https://core.ac.uk/download/pdf/80562055.pdf https://core.ac.uk/download/pdf/80562055.pdf [6] https://www.nytimes.com/1999/08/23/opinion/the-wall-street-casino.html https://www.nytimes.com/1999/08/23/opinion/the-wall-street-c... [7] https://www.washingtonpost.com/archive/politics/2002/11/11/nasdaq-casino-had-few-safeguards/fe3b07d3-e400-41ce-9a0f-8f27d765d84d/ https://www.washingtonpost.com/archive/politics/2002/11/11/n... [8] https://www.wsj.com/articles/SB10001424052702303499204576388151661037330 https://www.wsj.com/articles/SB10001424052702303499204576388... [9] http://www.dollarsandsense.org/archives/2014/0514orr.html http://www.dollarsandsense.org/archives/2014/0514orr.html [10] https://www.businessinsider.com/the-stock-market-is-a-dangerous-casino-2015-10 https://www.businessinsider.com/the-stock-market-is-a-danger... [11] https://stocksandcoffee.com/stock-market-casino/ https://stocksandcoffee.com/stock-market-casino/

dhuk_2018 6y ago

Holding a single options contract is no more or less risky than holding 100 shares of that same underlying stock... if you know what you are doing. The problem is, people don't know what they're doing and make oversized trades that get them into trouble.

zarkov99 6y ago

Its always been like that, though admittedly Robin Hood has made the link even more transparent. I do not think that is the whole story or even the main story though. If you have a bit of savings today, there simply is no other place to put it in and if you just keep it in cash you are 100% guaranteed a negative return.

beezle 6y ago
Negative return wrt inflation. Of course, you could buy TIPS and earn the inflation rate and perhaps some spread over, ie a 'real' return.

beezle 6y ago

No trade is that far removed from gambling. There is always risk of some type. Trading at the professional level in virtually all underlying markets has become 'one way'. There are few, if any, market makers left. Everyone is now a prop trader, aka punter, though some will try to deny it saying they have 'models' or 'systems' and not just instinct. Of course, many gamblers also have models and systems and it is not uncommon for professional traders to also be big casino/sports gamblers. Less talked about is the ever shorter time horizon of what even still pass as investments. The shorter the holding period, the more likely the nature of the trade was more akin to a gamble than an investment. To your other point, brokers don't "sell" options or other risky products to anyone anymore. The idea of someone calling you up on the phone and suggesting you buy 100 lots of OTM calls on TSLA is quaint at best. What brokers do do is make available products through their trading platforms that private 'investors' may trade after signing off on the appropriate paperwork (for instance, an options or futures agreement). Brokers are not going to check too hard to see if you lied about your knowledge of the prodcuts (and hence the 'suitability') as it is you, not them, who are going to make the trade/investment. As to the financial aspect, brokers today have raced to the bottom with zero commisions on most products in exchange for selling order flow to other market participants. While it is certainly possible that in some cases the revenue from selling options trades is higher than equities, on the whole it is probably on a par. Robinhood averages $0.00026 per $1 of trade value for equities from Citadel. They average $0.50 per contract on the option side. So 1000 shares of a $50 stock gives $13 vs say 10 contracts giving $5. While 100 contracts might be more revenue, a 100 lot trade is probably a very cheap option with narrow(er) spread and not likely to get Robinhood $0.50/contract.