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Are all of the forced GME sales in the situation you describe? (Not a rhetorical question, I'm actually wondering if it's the case.) Let's say your scenario i
by elihu 6y ago
Are all of the forced GME sales in the situation you describe? (Not a rhetorical question, I'm actually wondering if it's the case.)
Let's say your scenario is a little different: you deposit $100, buy $300 of stock, and the stock goes up to $600, then drops to $400. Then the broker sells your shares at $400 to "protect themselves". If that's what's going on here, that seems wrong. On the other hand, if it's as you describe that seems reasonable.
- amluto 6y agoI don’t know what Robinhood is actually doing, but I think your scenario isn’t necessarily problematic. Suppose I deposit $100 and Butt $300 of stock. Now I have -$200 of cash. (The UI doesn’t necessarily show it like that, but that’s what’s in my account.). If the stock goes up to $600, I still have -$200 of cash. If the stock drops to $400, I still have -$200 of cash. If the volatility estimates change such that a rapid crash to $199 seems likely, the broker should margin call me, as a crash to $199 would send my account value negative. Contrast this with non-margin trading. If I deposit $400 and buy $300 of stock, I have $100 of cash, and the broker doesn’t particularly care what happens to the stock price, since they are taking no risk. Their clearer may impose requirements on them, but that’s a somewhat separate issue.