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The hard part about this case will be that both sides have a decent arguement. The way Robinhood displays this info is no different than most other brokers. I

The hard part about this case will be that both sides have a decent arguement. The way Robinhood displays this info is no different than most other brokers. I work at a fund and spent alotof time "smoothing" out our pnl to take care of issues like this where one side of a option basket gets exercised and the other side hasn't yet. By that regard Robinhood is in good standing as they follow the industry practice. The otherside of the coin is that option trading, especially for retail, often requires 1) the person requesting the ability to trade options explicitly. 2) a phone call that screens the user for a basic understanding. 3) the user has enough money in their account to be able to exercise any options that they buy, ie you buy 1 Call contract for Tesla that gives you the right to buy 100 shares at the strike, do you have enough money in your account to buy 100 shares of tesla? If not then you can't buy 4) don't allow users to sell options unless they have a large capital margin in their account, and often don't allow them to write contracts at all. And robinhood has to have phone support for issues like this. This may be the thing that sinks them. Sometimes when dealing with money and contracts with time limits you need to talk to someone immediately on the phone. Robinhood is at fault here. this poor adult chose suicide, a permanent solution to a temporary problem. if he had just waited a few days or talked to his parents.

ainiriand 6y ago
Well, not sure about industry practice, my knowledge is limited, but when I opened my trading account I was presented with some questions to assess my understanding. For different products I get-together different questions if I want to enable them. This is with degiro.
- Zevis 6y ago
  I recently went through all of these tests and they're extremely trivial. I got through them with barely any knowledge about the topic. Even though I can now do options trading, I'm not going to touch it or anything like it until I've put in far more independent research, if at all.
  - madamelic 6y ago
    Buying options really isn't a problem. Your losses are capped at your premium if the options expire worthless. Selling options is where it gets _very_ dicey afaik. It seems like the person in question was selling covered options which is the safer way afaik. But yeah, you shouldn't be super scared of buying options. Selling options, in my opinion, requires more understanding.
  - holstvoogd 6y ago
    That I can recommend. It is extremely easy to loose money with it and end up with _nothing_. Especially the heavily leverage products can go from +100% to -100% in hours. And then your money is just gone. And you have nothing.
leetcrew 6y ago
> 3) the user has enough money in their account to be able to exercise any options that they buy, ie you buy 1 Call contract for Tesla that gives you the right to buy 100 shares at the strike, do you have enough money in your account to buy 100 shares of tesla? If not then you can't buy I don't quite understand this one. first of all, if I buy a call I don't have to exercise it. if I don't have enough cash to exercise it, can't I just sell the contract itself for roughly the same gain? if so, why should there be a capital requirement to buy one?
- ethbr0 6y ago
  I assume proof of "good faith." If you have no skin in the game, and can buy literally infinite numbers of options, with no intention to execute, that breaks a lot of things (not least, because of how you force counterparties to behave). Afaik, abusing this is a big part of the Reddit pump-and-dump train playbook.
  - leetcrew 6y ago
    you do have skin in the game though. you have to actually pay the premium for all those options. if you have no intention to exercise them (or at least sell the contracts before they expire), you are just throwing your own money away. if the premium is priced appropriately, this shouldn't be a problem for the counterparty. if not, it's kinda their own fault. am I missing something?
    - Spooky23 6y ago
      I think what you're missing is that you understand how options work. A 20 year old futzing around with Robinhood on his phone probably doesn't. Robinhood removes the friction associated with getting authorized for things like options trading. It's like taking a 16 year old to the craps table at a casino. IMO, it's irresponsible, both as a service provider and a stakeholder in the broader market to make that type of activity available to people with no money.
      - 6y ago
fatnoah 6y ago
The article has less information than some others. Here's a bit that's probably a key to the family's lawsuit: https://www.cbsnews.com/news/alex-kearns-robinhood-trader-suicide-wrongful-death-suit/ https://www.cbsnews.com/news/alex-kearns-robinhood-trader-su... >Later that night, at 3:26 a.m., the company sent an automated email demanding Alex take "immediate action," requesting a payment of more than $170,000 in just a few days. Alex was then unable to contact customer support via phone and email. The day after his suicide, he was sent this email: >"Great news!" The email read, "We're reaching out to confirm that you've met your margin call and we've lifted your trade restrictions. If you have any questions about your margin call, please feel free to reach out. We're happy to help!"
- tedunangst 6y ago
  That's a pretty typical email to get from a broker. If you want to hold on to the stock that's been put into your account for some reason, you have to pay for it. Otherwise they'll settle things up for you.
- RHSeeger 6y ago
  > Alex was then unable to contact customer support via phone and email From what I read, he reached out to support (late at night) and they responded the next day (letting him know all was well?). Admittedly, this is after he killed himself, but it does seem to be a perfectly reasonable response time. It doesn't sound like they're in the wrong in that regard.
aparsons 6y ago
Disagree on 3. There is no obligation to buy. Agree on 4 that options you sell need to be covered.
jhowell 6y ago
> this poor adult chose suicide... if he had just waited a few days or talked to his parents. Independent dependent?
Yabood 6y ago
On number 4, I believe most brokers don’t allow you to trade options right away, you have to ask for permission before your account is approved for covered options trading (writing/selling options for stock you own, blocks of 100 shares for each option contract). To write options for stock you don’t own (this called naked), you have to ask for another approval. Usually both approvals require some online screening.

ainiriand 6y ago

Well, not sure about industry practice, my knowledge is limited, but when I opened my trading account I was presented with some questions to assess my understanding. For different products I get-together different questions if I want to enable them. This is with degiro.

Zevis 6y ago
I recently went through all of these tests and they're extremely trivial. I got through them with barely any knowledge about the topic. Even though I can now do options trading, I'm not going to touch it or anything like it until I've put in far more independent research, if at all.
- madamelic 6y ago
  Buying options really isn't a problem. Your losses are capped at your premium if the options expire worthless. Selling options is where it gets _very_ dicey afaik. It seems like the person in question was selling covered options which is the safer way afaik. But yeah, you shouldn't be super scared of buying options. Selling options, in my opinion, requires more understanding.
- holstvoogd 6y ago
  That I can recommend. It is extremely easy to loose money with it and end up with _nothing_. Especially the heavily leverage products can go from +100% to -100% in hours. And then your money is just gone. And you have nothing.

leetcrew 6y ago

> 3) the user has enough money in their account to be able to exercise any options that they buy, ie you buy 1 Call contract for Tesla that gives you the right to buy 100 shares at the strike, do you have enough money in your account to buy 100 shares of tesla? If not then you can't buy I don't quite understand this one. first of all, if I buy a call I don't have to exercise it. if I don't have enough cash to exercise it, can't I just sell the contract itself for roughly the same gain? if so, why should there be a capital requirement to buy one?

ethbr0 6y ago
I assume proof of "good faith." If you have no skin in the game, and can buy literally infinite numbers of options, with no intention to execute, that breaks a lot of things (not least, because of how you force counterparties to behave). Afaik, abusing this is a big part of the Reddit pump-and-dump train playbook.
- leetcrew 6y ago
  you do have skin in the game though. you have to actually pay the premium for all those options. if you have no intention to exercise them (or at least sell the contracts before they expire), you are just throwing your own money away. if the premium is priced appropriately, this shouldn't be a problem for the counterparty. if not, it's kinda their own fault. am I missing something?
  - Spooky23 6y ago
    I think what you're missing is that you understand how options work. A 20 year old futzing around with Robinhood on his phone probably doesn't. Robinhood removes the friction associated with getting authorized for things like options trading. It's like taking a 16 year old to the craps table at a casino. IMO, it's irresponsible, both as a service provider and a stakeholder in the broader market to make that type of activity available to people with no money.
    - 6y ago

fatnoah 6y ago

The article has less information than some others. Here's a bit that's probably a key to the family's lawsuit: https://www.cbsnews.com/news/alex-kearns-robinhood-trader-suicide-wrongful-death-suit/ https://www.cbsnews.com/news/alex-kearns-robinhood-trader-su... >Later that night, at 3:26 a.m., the company sent an automated email demanding Alex take "immediate action," requesting a payment of more than $170,000 in just a few days. Alex was then unable to contact customer support via phone and email. The day after his suicide, he was sent this email: >"Great news!" The email read, "We're reaching out to confirm that you've met your margin call and we've lifted your trade restrictions. If you have any questions about your margin call, please feel free to reach out. We're happy to help!"

tedunangst 6y ago
That's a pretty typical email to get from a broker. If you want to hold on to the stock that's been put into your account for some reason, you have to pay for it. Otherwise they'll settle things up for you.
RHSeeger 6y ago
> Alex was then unable to contact customer support via phone and email From what I read, he reached out to support (late at night) and they responded the next day (letting him know all was well?). Admittedly, this is after he killed himself, but it does seem to be a perfectly reasonable response time. It doesn't sound like they're in the wrong in that regard.

aparsons 6y ago

Disagree on 3. There is no obligation to buy. Agree on 4 that options you sell need to be covered.

jhowell 6y ago

> this poor adult chose suicide... if he had just waited a few days or talked to his parents. Independent dependent?

Yabood 6y ago

On number 4, I believe most brokers don’t allow you to trade options right away, you have to ask for permission before your account is approved for covered options trading (writing/selling options for stock you own, blocks of 100 shares for each option contract). To write options for stock you don’t own (this called naked), you have to ask for another approval. Usually both approvals require some online screening.