To give some context, the reason why he saw the 730k balance is because he misunderstood an options spread he had. A spread is basically both buying and selling a put or call. There's a short leg...
To give some context, the reason why he saw the 730k balance is because he misunderstood an options spread he had. A spread is basically both buying and selling a put or call. There's a short leg and a long leg. You're making a profit or loss on the difference.
What happened in this case was that the short leg was assigned, but Robinhood had not yet assigned his long leg, which would have covered almost all of losses.
Think of it like if you ran a store. At some point, after buying merchandise but before selling it, you're deep in the red. That was the state he was at.
His spread almost certainly did not have 730k kind of risk. But if he was doing it with a stock that had a high per stock value like Amazon or Tesla, even though his net swing might only be a few thousand profit or loss, at one moment he owed 730k dollars.
Now, this wasn't really a UI glitch per say. It's what all the online brokers do if they don't complete your transaction immediately. If you understood what the spread was, it shouldnt alarm you.
So the issue really is: is robinhood allowing people who have no idea what they're doing access to complex financial tools?
It may not be immediately obvious to everyone. If you have no idea about the situation, it can also seem like maybe Robinhood likes getting people in debt (note; they don't make money from that),...
It may not be immediately obvious to everyone. If you have no idea about the situation, it can also seem like maybe Robinhood likes getting people in debt (note; they don't make money from that), or that it was bad UI.
It makes it a bit more complicated, since that's really Robinhood's reason for existence. Before it, there was criticism that tools like options were restricted to "institutional investors", i.e basically rich people. These were fancy tools that rich people only allowed other rich people to use, a mechanism to widen the gap between the investor class and everyone else.
Hence "Robinhood".
So there's the libertarian angle: Robinhood does make warn you, it also doesn't allow you to trade options immediately, and it makes you sign a bunch of scary legalese which is pretty explicitly scary. A private citizen should be allowed to, if they choose, ignore all these and fuck themselves over. He was 20 after all, that's full fledged adult. A 20 year old can go to Vegas and come out with just the clothes on his back and the government won't bat an eye.
Then there's also the angle wherein the government has, to some extent, a duty to protect citizens from themselves.
Oh nice. I always associated the name just as them being self-aggrandising about their "no-fee trading" feature. Do they actually market their product like this? There's a "get-rich-quick scheme"...
These were fancy tools that rich people only allowed other rich people to use, a mechanism to widen the gap between the investor class and everyone else. Hence "Robinhood".
Oh nice. I always associated the name just as them being self-aggrandising about their "no-fee trading" feature. Do they actually market their product like this?
There's a "get-rich-quick scheme" element in that kind of characterisation of their business, where the "fancy tools" are treated as the key to the riches of the investor class, when in actuality that class's wealth is a product of complex socio-economic and political circumstances.
Yep. It was born in 2008, after the Financial Crisis. Something big then was the fact that those subprime mortgage trades? The banks only let you do them if you were an institutional investor....
Yep. It was born in 2008, after the Financial Crisis. Something big then was the fact that those subprime mortgage trades? The banks only let you do them if you were an institutional investor.
Bringing those into the realm of anyone with a smartphone is part of the appeal.
I've gathered from the people who have talked to me about using the app that they don't really understand the implications of buying/selling stocks and it pretty much is gambling, to them. Well,...
I've gathered from the people who have talked to me about using the app that they don't really understand the implications of buying/selling stocks and it pretty much is gambling, to them. Well, yea, it's that in the short term. I guess what they don't understand is that they should be thinking of buying stock as a long-term investment, rather than buying and selling based on day-to-day swings. I'm not sure if Robinhood goes through the trouble of educating first-time investors in this way (at least, I don't remember anything of the sort back when I used the app). And I'm not sure first-time investors would heed such education. People tend to want things (profits) NOW.
Anyhow, this side convo kinda went past the scope of the article...F
But isn't normal trading allowed at 18+ too? I mean this is a horrible tragedy of course - and I don't know full well what robinhood is and how the app works etc, but everything from gambling with...
But isn't normal trading allowed at 18+ too? I mean this is a horrible tragedy of course - and I don't know full well what robinhood is and how the app works etc, but everything from gambling with stocks to gambling on sports is possible when you're 20, right?
I know im kinda doxing myself by saying this and I dont have much to contribute but at this point I dont really care. Ive been wondering when I would see an article about this pop up on here. Ive...
I know im kinda doxing myself by saying this and I dont have much to contribute but at this point I dont really care.
Ive been wondering when I would see an article about this pop up on here. Ive known and been great friends with Alex ever since we were 6 or 7. I dont know if I have much more insight to give on the whole situation, especially since I know jack shit about stocks, but if anyone has any questions I'm more than willing to chat. At this point I'm kind of just coping with it by talking about him as much as possible.
Sorry for the late reply, ive been pretty busy. Alex within the past couple of years years got into working out a lot and probably gained about 40 pounds of muscle. Junior-Senior year of...
Sorry for the late reply, ive been pretty busy.
Alex within the past couple of years years got into working out a lot and probably gained about 40 pounds of muscle. Junior-Senior year of highschool whenever our friends would gather in my basement him and another friend of ours would start wrestling. Before he started weight lifting they would be a pretty even match and we joked about having a big wrestling event to determine who really was the best.
By the time we actually held our wrestlemania, Alex started lifting weights and beat him pretty easily. We had a second one about half a year later and Alex won again. For the third and final one, pretty much our whole group participated and wrestled. We were planning on doing another one this summer but the whole disease thing happened.
As of now, our group decided to form our own isolation cell and spend pretty much every day together. We've visited his parents a couple of times and theyre doing about as well as can be expected.
To give some context, the reason why he saw the 730k balance is because he misunderstood an options spread he had. A spread is basically both buying and selling a put or call. There's a short leg and a long leg. You're making a profit or loss on the difference.
What happened in this case was that the short leg was assigned, but Robinhood had not yet assigned his long leg, which would have covered almost all of losses.
Think of it like if you ran a store. At some point, after buying merchandise but before selling it, you're deep in the red. That was the state he was at.
His spread almost certainly did not have 730k kind of risk. But if he was doing it with a stock that had a high per stock value like Amazon or Tesla, even though his net swing might only be a few thousand profit or loss, at one moment he owed 730k dollars.
Now, this wasn't really a UI glitch per say. It's what all the online brokers do if they don't complete your transaction immediately. If you understood what the spread was, it shouldnt alarm you.
So the issue really is: is robinhood allowing people who have no idea what they're doing access to complex financial tools?
Their raison d'être, no?
It may not be immediately obvious to everyone. If you have no idea about the situation, it can also seem like maybe Robinhood likes getting people in debt (note; they don't make money from that), or that it was bad UI.
It makes it a bit more complicated, since that's really Robinhood's reason for existence. Before it, there was criticism that tools like options were restricted to "institutional investors", i.e basically rich people. These were fancy tools that rich people only allowed other rich people to use, a mechanism to widen the gap between the investor class and everyone else.
Hence "Robinhood".
So there's the libertarian angle: Robinhood does make warn you, it also doesn't allow you to trade options immediately, and it makes you sign a bunch of scary legalese which is pretty explicitly scary. A private citizen should be allowed to, if they choose, ignore all these and fuck themselves over. He was 20 after all, that's full fledged adult. A 20 year old can go to Vegas and come out with just the clothes on his back and the government won't bat an eye.
Then there's also the angle wherein the government has, to some extent, a duty to protect citizens from themselves.
Basically, it is complicated.
Oh nice. I always associated the name just as them being self-aggrandising about their "no-fee trading" feature. Do they actually market their product like this?
There's a "get-rich-quick scheme" element in that kind of characterisation of their business, where the "fancy tools" are treated as the key to the riches of the investor class, when in actuality that class's wealth is a product of complex socio-economic and political circumstances.
Yep. It was born in 2008, after the Financial Crisis. Something big then was the fact that those subprime mortgage trades? The banks only let you do them if you were an institutional investor.
Bringing those into the realm of anyone with a smartphone is part of the appeal.
I've gathered from the people who have talked to me about using the app that they don't really understand the implications of buying/selling stocks and it pretty much is gambling, to them. Well, yea, it's that in the short term. I guess what they don't understand is that they should be thinking of buying stock as a long-term investment, rather than buying and selling based on day-to-day swings. I'm not sure if Robinhood goes through the trouble of educating first-time investors in this way (at least, I don't remember anything of the sort back when I used the app). And I'm not sure first-time investors would heed such education. People tend to want things (profits) NOW.
Anyhow, this side convo kinda went past the scope of the article...F
But isn't normal trading allowed at 18+ too? I mean this is a horrible tragedy of course - and I don't know full well what robinhood is and how the app works etc, but everything from gambling with stocks to gambling on sports is possible when you're 20, right?
I know im kinda doxing myself by saying this and I dont have much to contribute but at this point I dont really care.
Ive been wondering when I would see an article about this pop up on here. Ive known and been great friends with Alex ever since we were 6 or 7. I dont know if I have much more insight to give on the whole situation, especially since I know jack shit about stocks, but if anyone has any questions I'm more than willing to chat. At this point I'm kind of just coping with it by talking about him as much as possible.
What kind of hobbies did he have? You two have any classic adventures?
I’m so sorry to hear you’ve lost a life long friend.
Sorry for the late reply, ive been pretty busy.
Alex within the past couple of years years got into working out a lot and probably gained about 40 pounds of muscle. Junior-Senior year of highschool whenever our friends would gather in my basement him and another friend of ours would start wrestling. Before he started weight lifting they would be a pretty even match and we joked about having a big wrestling event to determine who really was the best.
By the time we actually held our wrestlemania, Alex started lifting weights and beat him pretty easily. We had a second one about half a year later and Alex won again. For the third and final one, pretty much our whole group participated and wrestled. We were planning on doing another one this summer but the whole disease thing happened.
As of now, our group decided to form our own isolation cell and spend pretty much every day together. We've visited his parents a couple of times and theyre doing about as well as can be expected.
No worries about the delay. I'm glad to hear some of your memories.
20 is too soon.