4 ms·

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

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.
- leetcrew 6y ago
  mainly I'm curious why chollida1 specifically thinks there ought to be a capital requirement to buy a call. I can see why you might not want to let a 20yo buy calls on margin (or anything on margin for that matter), but that wasn't specified in the original post. chollida1 seems to be a lot more experienced than me, so perhaps there is something to learn here. in the unfortunate case of this guy who took his life, robinhood apparently gave him access to a large amount of margin and the ability to write options. that seems crazy to me. I doubt schwab would let me do that, and I've been trading with them for years.
  - chollida1 6y ago
    Well the biggest reason alot of retail focused brokers dont' let you buy things yhou don't have the money to buy is what happens if you hold to expiry? If its out of the money no big deal, you lose your money, what happens if its in the money? Do they force you to exercise? If so then you owe them money that isn't in your account Do they sell it for you? If so at what time? what if there is no offsetting bid for your option? What if they sell it and you had planned on exercising? This just opens the brokerage up to all sorts of law suits eeven if their terms of service clearly aly out what they'll do. There just is not always a cut and dry best option for what to do with options before they expire. What happens if they sell an ITM option but it expires out of the money? Forcing the user to have money to exercise their options makes it clear and easy, no guessing on when to sell the option, no worrying there wont' be a market for the option, etc.
    - leetcrew 6y ago
      as long as they don't let my ITM option expire without doing anything, I don't think I would complain. but I see why a retail broker might not want to open this can of worms now. thanks for the breakdown.

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.

leetcrew 6y ago
mainly I'm curious why chollida1 specifically thinks there ought to be a capital requirement to buy a call. I can see why you might not want to let a 20yo buy calls on margin (or anything on margin for that matter), but that wasn't specified in the original post. chollida1 seems to be a lot more experienced than me, so perhaps there is something to learn here. in the unfortunate case of this guy who took his life, robinhood apparently gave him access to a large amount of margin and the ability to write options. that seems crazy to me. I doubt schwab would let me do that, and I've been trading with them for years.
- chollida1 6y ago
  Well the biggest reason alot of retail focused brokers dont' let you buy things yhou don't have the money to buy is what happens if you hold to expiry? If its out of the money no big deal, you lose your money, what happens if its in the money? Do they force you to exercise? If so then you owe them money that isn't in your account Do they sell it for you? If so at what time? what if there is no offsetting bid for your option? What if they sell it and you had planned on exercising? This just opens the brokerage up to all sorts of law suits eeven if their terms of service clearly aly out what they'll do. There just is not always a cut and dry best option for what to do with options before they expire. What happens if they sell an ITM option but it expires out of the money? Forcing the user to have money to exercise their options makes it clear and easy, no guessing on when to sell the option, no worrying there wont' be a market for the option, etc.
  - leetcrew 6y ago
    as long as they don't let my ITM option expire without doing anything, I don't think I would complain. but I see why a retail broker might not want to open this can of worms now. thanks for the breakdown.