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the instant availability of funds likely was a growth decision for better on boarding UX. imagine getting a referral from a friend who said hey get in on this s

by kbar13 6y ago

the instant availability of funds likely was a growth decision for better on boarding UX. imagine getting a referral from a friend who said hey get in on this stock, installing the app, and having to wait 2-5 business days for ACH to clear. guessing during normal operation this is an acceptable risk for robinhood and users, obviously this isn’t gonna fly when things go wild like the last couple of weeks

scsilver 6y ago
Imo The whole gamma squeeze was based on options writers not taking into account how quickly and army of new investors can leverage this instantly available capital.
- PhantomGremlin 6y ago
  The role of option writers is very much an under-reported part of this whole fiasco. Normally you want option writers to be able to provide liquidity by going naked short when selling calls. Obviously that fails when involving small companies with high short interest and hordes of "4chan found a Bloomberg Terminal" investors. I looked a little at GME during the week and I saw that the option market makers had significantly reduced their participation. I bet that they're also big losers. But that's what they do for a living, it's their own fault if they blew up selling calls naked. They knew the risks. Delta hedging doesn't work when a stock can move 100% in a single day.
cm2187 6y ago
Pretty much every broker does that when you buy stocks too. I think most securities settle T+2, which means that you are not the owner (and cash hasn't gone out of the door) until 2 business days after the transaction. But the broker will show your account debited immediately and will add the stock to your portfolio in the UI too. It's well intended but misleading.
- MattGaiser 6y ago
  https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations https://www.fidelity.com/learning-center/trading-investing/t...

by kbar13 6y ago

scsilver 6y ago

Imo The whole gamma squeeze was based on options writers not taking into account how quickly and army of new investors can leverage this instantly available capital.

PhantomGremlin 6y ago
The role of option writers is very much an under-reported part of this whole fiasco. Normally you want option writers to be able to provide liquidity by going naked short when selling calls. Obviously that fails when involving small companies with high short interest and hordes of "4chan found a Bloomberg Terminal" investors. I looked a little at GME during the week and I saw that the option market makers had significantly reduced their participation. I bet that they're also big losers. But that's what they do for a living, it's their own fault if they blew up selling calls naked. They knew the risks. Delta hedging doesn't work when a stock can move 100% in a single day.

cm2187 6y ago

Pretty much every broker does that when you buy stocks too. I think most securities settle T+2, which means that you are not the owner (and cash hasn't gone out of the door) until 2 business days after the transaction. But the broker will show your account debited immediately and will add the stock to your portfolio in the UI too. It's well intended but misleading.

MattGaiser 6y ago
https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations https://www.fidelity.com/learning-center/trading-investing/t...