Robinhood sued by family of 20-year old trader who committed suicide(cnbc.com)
cnbc.com
Robinhood sued by family of 20-year old trader who committed suicide
https://www.cnbc.com/2021/02/08/robinhood-sued-by-family-of-alex-kearns-20-year-old-trader-who-killed-himself-.html
136 comments
What I do not understand, is how do you just accept that a major company managing people's (potentially) life savings in a regulated market has no responsibility to pick up the phone? I would accept it if RH did not communicate with the customer at all because they were overwhelmed or something. But they did communicate, they sent out an email demanding money.
Do they have no process to talk to a customer who has lost a lot of money? This is not a rare freak event, it's key part of the business they are in. You'd think about this within the first 10 minutes of even entertaining the idea of starting a trading firm. Even the WSB reddit had a link to a suicide prevention hotline, how is RH more irresponsible than a random web forum.
We as a society don't need to bend over backwards to accomodate these zero-support business models - and especially not as the bedrock of our economy.
Lastly, I want to share a court case from Russia: for a few years it was common for banks to mass send out loan contracts in the post to random Tom, Dick and Harry. It would just appear in your postbox randomly, and if you countersign it you would get the money. One bloke scanned the document and amended it, he really went to town: increased the borrowing limit, put in a negative interest rate, etc. The bank signed it without realising. Obviously the bank sued, argued that their business model made it impossible to read every contract and the that the guy knew that.
The judge held up the contract, saying it wasn't the customers problem their business model involves spamming people and signing things without reading.
Do they have no process to talk to a customer who has lost a lot of money? This is not a rare freak event, it's key part of the business they are in. You'd think about this within the first 10 minutes of even entertaining the idea of starting a trading firm. Even the WSB reddit had a link to a suicide prevention hotline, how is RH more irresponsible than a random web forum.
We as a society don't need to bend over backwards to accomodate these zero-support business models - and especially not as the bedrock of our economy.
Lastly, I want to share a court case from Russia: for a few years it was common for banks to mass send out loan contracts in the post to random Tom, Dick and Harry. It would just appear in your postbox randomly, and if you countersign it you would get the money. One bloke scanned the document and amended it, he really went to town: increased the borrowing limit, put in a negative interest rate, etc. The bank signed it without realising. Obviously the bank sued, argued that their business model made it impossible to read every contract and the that the guy knew that.
The judge held up the contract, saying it wasn't the customers problem their business model involves spamming people and signing things without reading.
Those are changes RH made in reaction to this kid killing himself. They added increased barriers and human interaction because of this, that weren’t present when this happened to him.
Novice question: to lose that much money do you need to sell options? My understanding was that buying options was relatively safe.
Some options (buying calls or puts, selling covered calls or cash-secured puts) are "safe" in the sense that you can't lose more than your initial investment. Some do have a larger downside that can exceed your initial investment, and some have technically infinite downside. That's why there are several levels of options, so you can be approved for the safe bets but not the ones that could cost you a million dollars on a $1,000 bet.
yes
but the catch is that he didn't lose the money really ... it was a UX glitch that made him suicide
but the catch is that he didn't lose the money really ... it was a UX glitch that made him suicide
Options are considered binary plays: they either expire in the money, or they expire worthless.
It would be trivially simple to empty out your entire account by buying foolishly deep out-of-the-money options. (E.g. betting that GameStop shares will be worth $800 by the end of the week).
It would be trivially simple to empty out your entire account by buying foolishly deep out-of-the-money options. (E.g. betting that GameStop shares will be worth $800 by the end of the week).
> You have to go out of your way to trade options (they're disabled by default), and the only way you can get options enabled in Robinhood as a college freshman is to straight up lie on the application.
Could you please clarify, what does the application ask that he would have had to lie about?
Could you please clarify, what does the application ask that he would have had to lie about?
Questions like trading experience with different kinds of options, annual income, liquid net worth, total net worth are all pretty standard. Some brokers (not RH) also about about the source of your experience. Actual experience trading options may push you higher on the list than simply being instructed in what options are by an investment professional if you're otherwise on the border between two.
I've been declined for top options levels before because my total net worth was too low even with years of actual options trading experience (including complicated multi-leg strategies).
I've been declined for top options levels before because my total net worth was too low even with years of actual options trading experience (including complicated multi-leg strategies).
> How many brokers provide investment guidance?
It is usually quite explicit that they are not providing investment advice with the online ones.
It is usually quite explicit that they are not providing investment advice with the online ones.
Advice and guidance are two separate things (even if they sound the same.) Vanguard, for instance, has volumes explaining trading and investment strategies but advice would me more like implying you should use a strategy or buy a specific equity.
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>You have to go out of your way to trade options (they're disabled by default), and the only way you can get options enabled in Robinhood as a college freshman is to straight up lie on the application.
If all it took was a lie on an application for Robinhood to grant someone the ability to use extremely risky trading strategies, that's still Robinhood's fault. Robinhood isn't absolved of responsibility just because the student did something dishonest.
Given the fact he was 20 years old, his options application should have automatically been under a heightened degree of scrutiny, if not immediately rejected. That it wasn't indicates Robinhood is not responsibly implementing KYC controls, which is a huge deal.
If all it took was a lie on an application for Robinhood to grant someone the ability to use extremely risky trading strategies, that's still Robinhood's fault. Robinhood isn't absolved of responsibility just because the student did something dishonest.
Given the fact he was 20 years old, his options application should have automatically been under a heightened degree of scrutiny, if not immediately rejected. That it wasn't indicates Robinhood is not responsibly implementing KYC controls, which is a huge deal.
> If all it took was a lie on an application for Robinhood to grant someone the ability to use extremely risky trading strategies, that's still Robinhood's fault.
In your world, do we blame casinos when someone goes in and gambles away their money? My naive perspective sees no difference. The concept of an individual being responsible for their own terrible choices really seems to have changed unbelievably in the last 20 years.
In your world, do we blame casinos when someone goes in and gambles away their money? My naive perspective sees no difference. The concept of an individual being responsible for their own terrible choices really seems to have changed unbelievably in the last 20 years.
When I ask a criminal barrister for advise, he/she carries some responsibility, and should have my best interest in mind. If I ask a guy on the street, he does not.
If Robinhood wants to carry same responsibility as casinos, they should call themselves a casino.
Then they will loose certain privileges like in UK it's illegal for casinos to provide leverage or 'gambling debt', they will be subject to payout percentage regulation, etc. https://www.casino.co.uk/guides/payout-percentages-rtp/
If Robinhood wants to carry same responsibility as casinos, they should call themselves a casino.
Then they will loose certain privileges like in UK it's illegal for casinos to provide leverage or 'gambling debt', they will be subject to payout percentage regulation, etc. https://www.casino.co.uk/guides/payout-percentages-rtp/
https://www.finra.org/rules-guidance/rulebooks/finra-rules/2...
Try CTRL+F "suitability" for a five-second read of why the casino comparison doesn't apply here.
Try CTRL+F "suitability" for a five-second read of why the casino comparison doesn't apply here.
For the personal accountability perspective, I would say it applies even more, since there are no requirements at all for walking into a casino and burning up $100k, yet we don't blame the casinos, we blame the person burning the money.
For the perspective that Robinhood owns his risk somehow, from not following their suitability guidelines, I'm not familiar with any of this so can't speak about it. Naively reading this, it appears to be extremely open ended, requiring a consistent internal process for approval, along with a warning, rather than anything specific.
For the perspective that Robinhood owns his risk somehow, from not following their suitability guidelines, I'm not familiar with any of this so can't speak about it. Naively reading this, it appears to be extremely open ended, requiring a consistent internal process for approval, along with a warning, rather than anything specific.
"No member or person associated with a member shall recommend to any customer any transaction for the purchase or sale (writing) of an option contract unless such member or person associated therewith has *reasonable grounds* to believe upon the basis of information furnished by such customer after *reasonable inquiry* by the member or person associated therewith concerning the customer's investment objectives, financial situation and needs, and any other information known by such member or associated person, that the recommended transaction is not unsuitable for such customer."
The burden's on the firm to demonstrate why it believed the customer was qualified to trade the product, and to demonstrate that it made an effort to evaluate the customer's goals, finances, and needs.
The burden's on the firm to demonstrate why it believed the customer was qualified to trade the product, and to demonstrate that it made an effort to evaluate the customer's goals, finances, and needs.
Maybe the terminology is too foreign to me, but
> ... shall recommend to any customer any transaction ...
> ... that the recommended transaction is not suitable
Was Robinhood recommending transactions, or just enabling transactions? Even if not, this seems very open ended with no specifics, since “reasonable” is up for interpretation. I suppose we’ll see, probably sooner rather than later. I assume some actual specifics will result from all of this though.
> ... shall recommend to any customer any transaction ...
> ... that the recommended transaction is not suitable
Was Robinhood recommending transactions, or just enabling transactions? Even if not, this seems very open ended with no specifics, since “reasonable” is up for interpretation. I suppose we’ll see, probably sooner rather than later. I assume some actual specifics will result from all of this though.
The minimum age for gambling in many states is 21. So yes, if this 20 year old student walked into a casino and gambled away all his money, it would be the casino's fault for allowing that to happen.
You're an adult 18. I think people need to take more responsibility for their own actions instead of this increasing trend of treating adults as kids.
Children used to get more practice with making meaningful decisions and what not than they typically do today. A lot of 18 year olds aren't really prepared to behave like adults.
I'm not excusing it. I'm just making an observation.
And I'm not blaming parents for that. The world has changed and it's harder than it used to be to simultaneously protect kids and give them room to grow.
I'm not excusing it. I'm just making an observation.
And I'm not blaming parents for that. The world has changed and it's harder than it used to be to simultaneously protect kids and give them room to grow.
I generally agree. I think it also varies by location. I know 20 year olds who are married with kids and working in very adult jobs, such as the military or the mines. Generally these "kids" grew up in a more rural area and had less supervision and more responsibility.
And company's need to take more responsibility for their own actions as well, instead of blaming their users for being stupid. Predatory and aggressive behavior isn't made acceptable just because the person you preyed on was foolish.
Finance is one of the most highly regulated industries. If there was wrongdoing, the SEC would be all over it.
By your logic, you might as sue all auto manufacturers for not installing BAC interlocks on the vehicles they sell, or all tobacco companies just because the users are too stupid to read the giant warning labels. That's not the society I want to live in.
By your logic, you might as sue all auto manufacturers for not installing BAC interlocks on the vehicles they sell, or all tobacco companies just because the users are too stupid to read the giant warning labels. That's not the society I want to live in.
>If there was wrongdoing, the SEC would be all over it.
Like this? https://www.cnbc.com/2020/12/16/robinhood-reportedly-facing-...
>all tobacco companies just because the users are too stupid to read the giant warning labels
Like this? https://www.publichealthlawcenter.org/topics/commercial-toba...
In our society, we hold companies responsible for being poor citizens. And "our users are stupid" is not a valid justification for being a poor citizen, whether you like that or not.
Like this? https://www.cnbc.com/2020/12/16/robinhood-reportedly-facing-...
>all tobacco companies just because the users are too stupid to read the giant warning labels
Like this? https://www.publichealthlawcenter.org/topics/commercial-toba...
In our society, we hold companies responsible for being poor citizens. And "our users are stupid" is not a valid justification for being a poor citizen, whether you like that or not.
I'm not talking about the part prior to the crackdown on tobacco. I'm saying there are still people using it after the giant warning labels.
They have an investigation, but we'll see what it turns up. Remember, we work on an innocent until proven guilty basis.
If you're saying that companies need to be good citizens or we shut them down, then you should close almost all businesses. You don't think the other brokers take the same steps that RH does? I can tell you from the inside that they do.
They have an investigation, but we'll see what it turns up. Remember, we work on an innocent until proven guilty basis.
If you're saying that companies need to be good citizens or we shut them down, then you should close almost all businesses. You don't think the other brokers take the same steps that RH does? I can tell you from the inside that they do.
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It took decades of lawsuits and to get those warning labels, which would vanish overnight if the government didn’t force it. Those decades included a lot of misinformation campaigns to the point of fraud. Most smokers simply cannot quit - they have tried dozens of times and most got hooked in high school
Are the people running the firm adults? Do they have responsibilities, like checking customer documents, picking up the phone and showing correct balance?
I don't believe they have to pick up the phone. They are a virtual company that does get back to people, but it takes time. If we are saying prompt replies are a required responsibility, then how do we tolerate the government's widespread slowness? The document checking and balances are a common thing across industry - documents are checked in automated systems that check the SEC criteria and balances are not instantly updated. Other brokers have these same issues.
If someone is 20, it's more likely that they have no idea what they're doing with options, and a brokerage has a regulatory requirement to ensure that options are suitable for the customer before approving an account for options trading. It's not a bright line; age is information that can be used to make a reasonable determination about whether the customer is cognizant of all the risks. At the very least, they should call and speak with young customers before approving.
They usually just use a questionnaire online. Most brokers aren't making phone calls unless it's absolutely necessary. Not saying it's the best way, but if RH is getting sued, then any other broker could be too. They could start testing people, like with a version of the CFA Fundamentals test.
We've created this bizarre feedback loop of treating older and older people to like children, which causes older and older people to act like children.
I know man, these hedgefund managers and Boeing executives have been totally infantilized!
I'm clearly talking about the 18-year-olds referenced in the post I'm replying to. But good job I suppose?
I am just pointing out that there is a range of people trying to absolve themselves of responsibility, and I am not clear what leads folks to conclude that 18-year are the problem.
When COVID/2008 hits the fan, its the young people on zero hour contract that loose their income first, landlords might loose some, and banks loose least.
If anything our system is setup so that the higher you are, the less consequences you face. I believe this is the new phenomenon and its not helped by 'kids these days, back in my day...'.
When COVID/2008 hits the fan, its the young people on zero hour contract that loose their income first, landlords might loose some, and banks loose least.
If anything our system is setup so that the higher you are, the less consequences you face. I believe this is the new phenomenon and its not helped by 'kids these days, back in my day...'.
New phenomenon? You should read some history books! It’s never not been like this, it’s almost always been worse: thousands of years of those at the bottom losing everything while those at the top, if not getting assassinated in power struggles, get all the payoffs. As bad as it is today, it was almost always much worse in the past.
However 18 year olds are able to sign any legal document, and also join the military.
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RH's entire schtick is to be the amateur's investment broker. Their barrier to entry for margin and options is practically 0. When the only thing you need to do in order to get access to level 3 options is check a couple boxes, you're practically encouraging this type of activity. RH is breaking a ton of rules atm and there is a reason why most brokers are high touch for margin/options and unfortunately the Kearns' family is first hand evidence of this.
Most other brokers WILL NOT allow this. When I applied for options Schwab had a broker call me and make sure I knew about all the risks involved for the level I applied for.
RH was also down a couple times in March, which lost me a good amount of money. A week is a VERY long time if you're playing short-term options. There's also other issues where they were holding customer shares in margin when they had cash to cover, and when they've allowed customers to leverage 5k -> 1M of positions (a huge nono).
The conclusion here is that RH is a toy broker following the mantra of move fast and breaks things. Good if you're casually investing, but for options and serious investing with real amounts of cash it's worth getting a broker that is serious at providing reliable service.
Most other brokers WILL NOT allow this. When I applied for options Schwab had a broker call me and make sure I knew about all the risks involved for the level I applied for.
RH was also down a couple times in March, which lost me a good amount of money. A week is a VERY long time if you're playing short-term options. There's also other issues where they were holding customer shares in margin when they had cash to cover, and when they've allowed customers to leverage 5k -> 1M of positions (a huge nono).
The conclusion here is that RH is a toy broker following the mantra of move fast and breaks things. Good if you're casually investing, but for options and serious investing with real amounts of cash it's worth getting a broker that is serious at providing reliable service.
>The conclusion here is that RH is a toy broker following the mantra of move fast and breaks things.
I personally see them at the Juul of the finance world. They're intentionally targeting young inexperienced people and telling them "just download this app and you'll be rich! all your friends are doing it, don't miss out!"
I personally see them at the Juul of the finance world. They're intentionally targeting young inexperienced people and telling them "just download this app and you'll be rich! all your friends are doing it, don't miss out!"
Not sure how many brokers you have applied to lately but -
TDA, Fidelity, Webull, Interactive Brokers, Tasty works, ETrade, and more all make options just as accessible as RH.
TDA, Fidelity, Webull, Interactive Brokers, Tasty works, ETrade, and more all make options just as accessible as RH.
When I applied to enable Options trading on my Fidelity account, I had to wait 3 days plus they sent me a booklet which looked like it was printed in the 80s about the risks of options trading, they also pointed me to a section on their site with tutorials about options trading once they had enabled my account. By the time they were done I was rethinking my plan to trade options :-)
How long ago was this?
I opened both Fidelity and E*Trade brokerage accounts in the last 3 weeks and it took minutes to submit options applications for both, at max levels. ET was approved instantly and Fidelity the next day. Not a single piece of paper from either one.
I opened both Fidelity and E*Trade brokerage accounts in the last 3 weeks and it took minutes to submit options applications for both, at max levels. ET was approved instantly and Fidelity the next day. Not a single piece of paper from either one.
Depending on how much money you are putting in your account, you might be getting a different reaction. It also might depend on the product; I think Fidelity has at least 2 different types of trading accounts (I think one is paid). The paid one may not have as many guardrails.
> and a person followed up about a week late
I remember reading when the original story broke that the negative balance / suicide happened over a weekend.
And about the the negative balance, I've had a similar story (with much less). The problem is that once a long-short vertical option expires worthless, Robinhood showed a negative balance for the full amount of the short position, even if you had a long position covering most of it. Because they don't update the available balance/money you made from the long side until it clears (which can take a few days).
I believe it was extremely bad UX on Robinhood's part, even my heart skipped a beat when I saw the negative bal, and that was for only 5k.
I remember reading when the original story broke that the negative balance / suicide happened over a weekend.
And about the the negative balance, I've had a similar story (with much less). The problem is that once a long-short vertical option expires worthless, Robinhood showed a negative balance for the full amount of the short position, even if you had a long position covering most of it. Because they don't update the available balance/money you made from the long side until it clears (which can take a few days).
I believe it was extremely bad UX on Robinhood's part, even my heart skipped a beat when I saw the negative bal, and that was for only 5k.
Imagine being the UX designer
Good point. I can't blame the UX ppl though for not anticipating some clearing issues, they are after all UX ppl not finance majors.
> You have to go out of your way to trade options (they're disabled by default), and the only way you can get options enabled in Robinhood as a college freshman is to straight up lie on the application.
Isn't this a problem with most brokers? They all seem to require that you claim experience trading an asset class before they let you trade that asset class.
Isn't this a problem with most brokers? They all seem to require that you claim experience trading an asset class before they let you trade that asset class.
Brokers are required by law to "protect" traders from financially harming themselves by restricting the trades that can be made until the trader verifies that they know what they are doing. Some brokers will go as far as to personally call you up and give you an on-the-spot quiz about how options work before letting you trade them, for example.
Many brokers seem to have gotten very lax about this in recent years, and even Schwab/Ameritrade allowed me to trade options without verifying anything. My guess is that the recent Robinhhood/GME fiasco is going to see FINRA cracking down hard and reinstating some strict verification procedures.
Many brokers seem to have gotten very lax about this in recent years, and even Schwab/Ameritrade allowed me to trade options without verifying anything. My guess is that the recent Robinhhood/GME fiasco is going to see FINRA cracking down hard and reinstating some strict verification procedures.
I was able to trade options with TradeKing in 2010 by just checking a box, claiming that I knew that I was doing.
(I was still in college and did not know what I was doing, but fortunately only ended up losing a few hundred bucks.)
This isn't new - it's how it's worked for a good long while.
(I was still in college and did not know what I was doing, but fortunately only ended up losing a few hundred bucks.)
This isn't new - it's how it's worked for a good long while.
The regulations, such as FINRA Rule 2111, were not in place until the early 2010s. FINRA/SEC implemented stricter requirements for the verification I mentioned in my first comment, but over the past ~5-7 years the brokerages have relaxed them. So yes, it is new relative to your experience in 2010.
Yeah, it's pretty easy to get level 3 trading option these days. In fact, if you select level 3 and answer incorrect, they even prompt you and say, hey that option won't let you get verified for level 3.
With older brokerage firms, they use to call you up after you signed up. You would have to chat with them on the phone before they unlocked your account.
With older brokerage firms, they use to call you up after you signed up. You would have to chat with them on the phone before they unlocked your account.
Sadly I agree. The idea that someone willingly applied to have options trading available and is in fact an adult should be enough that its not the trading platform's fault.
If it were underage girls that lied for pornhub amateur and got accepted the argument would not hold, so I don't think it should hold in this case either.
It is the company's job to make sure the screening process is not too permissive.
It is the company's job to make sure the screening process is not too permissive.
It was partially noted in past threads, and partially missed, but this 20 year old didn't actually lose the money he thought he lost. It was basically a "leaky abstraction" of the backend that bubbled up. Their total lack of any real customer support since it's not "scalable" also contributed to this tragic adn avoiadable death.
Robinhood's legacy is commission free equity trades at pretty much every single retail brokerage, whether they survive as an app or not.
There is a reasonable argument to be made that whatever minute price slippage customers might experience(which I believe isn't even supposed to be legal due to NBBO and Reg NMS? not an expert) due to payment for order flow is much less than the $10 commissions at deep discount retail brokerages and certainly than the $50 trades in the old days of calling up your friendly local rent seeking broker -- for typical robinhood sized equity transactions.
Robinhood has plenty of problems but they directly caused investors to be able to trade for free @ fidelity, vanguard, schwab, etc which is obviously a boon to consumers.
Also imo at least robinhood is somewhat up front about like 'the market is a zany gambling game' with their UX. Contrast with IBKR and TOS who heavily market their stuff to Serious Portfolio Dads With 4 Monitors and then ALSO do sheisty manipulation appearing stuff to "protect their clients from volatility." RH targeting a smaller computer and being colorful doesn't make it any worse than other discount retail brokerages shoving derivative trading platforms at unsophisticated retail.
There is a reasonable argument to be made that whatever minute price slippage customers might experience(which I believe isn't even supposed to be legal due to NBBO and Reg NMS? not an expert) due to payment for order flow is much less than the $10 commissions at deep discount retail brokerages and certainly than the $50 trades in the old days of calling up your friendly local rent seeking broker -- for typical robinhood sized equity transactions.
Robinhood has plenty of problems but they directly caused investors to be able to trade for free @ fidelity, vanguard, schwab, etc which is obviously a boon to consumers.
Also imo at least robinhood is somewhat up front about like 'the market is a zany gambling game' with their UX. Contrast with IBKR and TOS who heavily market their stuff to Serious Portfolio Dads With 4 Monitors and then ALSO do sheisty manipulation appearing stuff to "protect their clients from volatility." RH targeting a smaller computer and being colorful doesn't make it any worse than other discount retail brokerages shoving derivative trading platforms at unsophisticated retail.
100% agree. The $5 - $10 commissions that existed forever are still a great deal if you're moving around serious amounts of capital and it gets your order fulfilled a few pennies cheaper, but when you're only trying to purchase a double-digit dollar amount of stock, they're ridiculous.
I really do believe Robinhood is a net positive in the world because it has provided the lower classes the ability to more easily buy a small sliver of the means of production.
Most people lose money when they first start trading and investing. A lot of people are going through that the first time right now, but losing money in the market is the first step to making money in the market, and eventually I think this commission-free environment (paired with approachable apps) will build a great deal of financial competence among the general population.
I really do believe Robinhood is a net positive in the world because it has provided the lower classes the ability to more easily buy a small sliver of the means of production.
Most people lose money when they first start trading and investing. A lot of people are going through that the first time right now, but losing money in the market is the first step to making money in the market, and eventually I think this commission-free environment (paired with approachable apps) will build a great deal of financial competence among the general population.
Does anyone know what his position was? Probably vertical put spreads, credit or debit could’ve resulted in this situation.
Short put vertical: Underlying is at 392, sell 200 390P, buy 20 389P. Underlying moves to 387, counterparty exercises 20 ITM puts, now you’re long 2,000 shares at 390, you exercise your ITM 389P and sell 2,000 shares at 389 for a net $2,000 loss.
Long put vertical: Underlying at 392, buy 20 390P, sell 20 389P. Underlying moves to 387, counterparty exercises 20 ITM puts, now you’re long 2,000 shares at 389, you exercise your ITM 390P and sell 2,000 shares at 390 for a $2,000 net gain.
Either one of these would’ve shown a negative $780,000 balance when the early exercise happened, poor kid didn’t know it was recoverable.
Short put vertical: Underlying is at 392, sell 200 390P, buy 20 389P. Underlying moves to 387, counterparty exercises 20 ITM puts, now you’re long 2,000 shares at 390, you exercise your ITM 389P and sell 2,000 shares at 389 for a net $2,000 loss.
Long put vertical: Underlying at 392, buy 20 390P, sell 20 389P. Underlying moves to 387, counterparty exercises 20 ITM puts, now you’re long 2,000 shares at 389, you exercise your ITM 390P and sell 2,000 shares at 390 for a $2,000 net gain.
Either one of these would’ve shown a negative $780,000 balance when the early exercise happened, poor kid didn’t know it was recoverable.
Well damn, now I understand how this would confuse someone. Remind me to never get started with options.
the more i hear about options/puts and then the short counterpart i feel as if the whole game is convoluted to hide the fact that its less investing and more gambling.
Straw man. No one's saying that options are for investing. They're used for speculation and hedging/risk management.
Why downvoting? It's undeniable that some people are lured in bad investments practices because they share many characteristics with gambling. I'm not complaining about morality or ethic, it's just clear that these platforms are making a lot of money from trading addicted people.
I didn’t downvote but I’ll share that I have a reflexive dislike of this conflation because gambling is inherently ludic whereas option trading is intended to be an activity that creates value on the market. Gambling is consumption whereas options are capital allocation.
Capital allocation can be ludic; where do you get the idea that just because you're allocating capital, there's no thrill or enjoyment to be found? You're taking a crank on the slot machine of the economy; throw in the inherent rush of leverage, and the dopamine hit of a profitable/successful trade, and I'd say speculation is inherently ludic.
Its not inherently ludic because the point isn’t having fun. The point of gambling is the contest. The point of trading options is making money or hedging risk. The fact that someone can have fun doing work doesn’t make work inherently fun. Having fun is inherently fun. Speculation is work, gambling is fun, according to the nature of the activity, regardless of the existence of professional gamblers and recreational option traders.
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Unlike stocks and bonds, options are a zero sum game (minus fees). So they're like gambling in that sense. But they are a useful tool for investors to hedge risk.
> Unlike stocks and bonds, options are a zero sum game
If each party only makes the one trade and has no other securities in his portfolio, maybe. That's almost never the case.
For example, if you're a market maker at Goldman Sachs and you sell 10k calls to a hedge fund, you want the stock to go up monotonically and gradually so that the customer profits on direction, you profit on volatility, and you can make money on the unwind trade as well. Win-win.
If each party only makes the one trade and has no other securities in his portfolio, maybe. That's almost never the case.
For example, if you're a market maker at Goldman Sachs and you sell 10k calls to a hedge fund, you want the stock to go up monotonically and gradually so that the customer profits on direction, you profit on volatility, and you can make money on the unwind trade as well. Win-win.
basically there's continuous choice of risk, going from shares, to ITM options, to OTM options.
Using various combinations of option for a single trade allows the risk/reward of the position to be more finely tuned based on changes to the underlying.
Ehhh options really kinda kick ass, but only when you know what you are doing and understand the max profit and loss of a trade.
This same thing actually happened to me about a year ago in my speculation trading account. Here is a screenshot of what my account looked like on Saturday evening.
https://i.imgur.com/a2JmlyQ.jpg
Of course, I have a fairly advanced understanding of options and knew it was mathematically impossible to have lost that amount, so to me it was just a humorous and quirky bug in some startup software.
What I think needs to be noted is that the only way this young man would have gotten access to the level of options required to place a trade like that was to deliberately lie on his account application. Someone who was qualified to have the level of trading access he had would have immediately known he wasnt $780k in the hole. So while Robinhood wrote some bad code, there is some personal responsibility that should be assigned here. Such a sad situation.
https://i.imgur.com/a2JmlyQ.jpg
Of course, I have a fairly advanced understanding of options and knew it was mathematically impossible to have lost that amount, so to me it was just a humorous and quirky bug in some startup software.
What I think needs to be noted is that the only way this young man would have gotten access to the level of options required to place a trade like that was to deliberately lie on his account application. Someone who was qualified to have the level of trading access he had would have immediately known he wasnt $780k in the hole. So while Robinhood wrote some bad code, there is some personal responsibility that should be assigned here. Such a sad situation.
Not sure about that last part. For some color, here's the Robinhood UI for buying calls: https://twitter.com/neoliberal_dad/status/135778483584729907...
I'm not talking about the UI, I'm talking about the application you fill out to get access to level 2 options permissions
In what way would he have had to lie on the application? Is it something like "yes I have read these enormous pages you've thrown at me and know what I am doing"?
More than that. Questions like “What is your net worth?” And questions about your experience level with stocks and options. He most likely lied.
But Robinhood obviously makes no attempt to verify the answers. If two kids, one riding on the other’s shoulders inside of a trench coat walked into a bank and claimed to be an adult, you’d put at least some blame on the bank if those kids walked out with a loan.
But Robinhood obviously makes no attempt to verify the answers. If two kids, one riding on the other’s shoulders inside of a trench coat walked into a bank and claimed to be an adult, you’d put at least some blame on the bank if those kids walked out with a loan.
> If two kids, one riding on the other’s shoulders inside of a trench coat walked into a bank and claimed to be an adult, you’d put at least some blame on the bank if those kids walked out with a loan.
A kid lying to an adult is different from an adult lying to an adult.
A kid lying to an adult is different from an adult lying to an adult.
No, it's a simple form that you have to fill out at every brokerage nowadays. It asks questions about your risk tolerance, how well you handle volatility, etc...
Having not used Robinhood, can you explain what he had to say to get this access?
You'd have to lie about your income and experience level, and the amount of time you've been trading
Do you know that for sure?
I recently applied for (and was granted) the ability to trade options.
For the question "How long have you been trading options?" I wrote "never - because I can't yet".
My application was approved.
I recently applied for (and was granted) the ability to trade options.
For the question "How long have you been trading options?" I wrote "never - because I can't yet".
My application was approved.
Options aren't binary. There are different levels of options access. Not all options are as dangerous as others. Buying calls or puts is pretty safe (by safe I don't mean you won't lose your money, just that your downside is limited to the initial cost).
This is tragic, but misguided.
I was sued for $55MM this year after my (now former) business partner lost $5MM to Vietnamese mafia which triggered a loss for a customer.
Was crazy, but I took a deep breath and realized worse case was personal bankruptcy if they pierced the LLC.
The worse case scenario for this kid would have been 7 years of bad credit (had he lost $750k).
There were some deeper things going on in his life and family system that no one is talking about.
Oh, I ended up selling my position to my partner, getting indemnified and walking away with a few hundred grand (some still be to paid). It was super stressful, and I’m really grateful I’ve learned how to process painful experiences (I work as a mindset coach to billionaire tech founders).
I was sued for $55MM this year after my (now former) business partner lost $5MM to Vietnamese mafia which triggered a loss for a customer.
Was crazy, but I took a deep breath and realized worse case was personal bankruptcy if they pierced the LLC.
The worse case scenario for this kid would have been 7 years of bad credit (had he lost $750k).
There were some deeper things going on in his life and family system that no one is talking about.
Oh, I ended up selling my position to my partner, getting indemnified and walking away with a few hundred grand (some still be to paid). It was super stressful, and I’m really grateful I’ve learned how to process painful experiences (I work as a mindset coach to billionaire tech founders).
The article mentions the app misleading him into believing he had incurred the debt, but never goes into how it was misleading. Was he actually in that amount of debt, or was he misled? If he was in that level of debt, was he misled about the risks he was taking?
I'm not a fan of the argument "they shouldn't have let him make decisions he didn't understand" because I believe the onus is on us to know what we are doing before we do it, and arguments like these are what led us to our current regulatory framework disallowing investors into markets unless they meet capital requirements, essentially pricing everyone but rich people out of markets.
I'm not a fan of the argument "they shouldn't have let him make decisions he didn't understand" because I believe the onus is on us to know what we are doing before we do it, and arguments like these are what led us to our current regulatory framework disallowing investors into markets unless they meet capital requirements, essentially pricing everyone but rich people out of markets.
Robinhood’s app is notorious for indicating a margin call when one is not forthcoming for complex options strategies (options spreads, in this case).
PSA: Please use a real brokerage when participating in capital markets. Fidelity is my recommendation, but others are at parity if not close. No one should be using Robinhood.
PSA: Please use a real brokerage when participating in capital markets. Fidelity is my recommendation, but others are at parity if not close. No one should be using Robinhood.
Funny you should mention Fidelity - I have their "full view" thing set up so I can see my accounts at other banks and brokerages on one screen. Late last year I did a wire transfer from my bank to a brokerage, and the brokerage credited me for the amount immediately, before the bank deducted it. On January 1, the sum of all my accounts was some not-insubstantial number of dollars higher than reality, and that's what Fidelity captured as my starting balance for the year. Then everything settled, and I logged in to Fidelity around January 3 to a message that since the beginning of the year my investments had lost that not-insubstantial amount of value. Heart skipped a beat.
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More people would if mobile apps weren't horrible. I have schwab and fidelity and the lack of basic features like listing option greeks, auto refreshing tick values, L2 data by established brokerages is baffling.
Why the need to do this on mobile? This is serious stuff. You're not just ordering dinner.
Do it on a desktop, and know what you're doing.
Do it on a desktop, and know what you're doing.
This is a silly no true Scotsman argument. A screen of information is a screen of information. There's nothing that can be displayed on a desktop screen that is somehow incompatible with the pixels on my phone or tablet, which both have higher resolution than my desktop.
I've been following this story but this was new to me:
> The suit says that Kearns made three attempts to contact Robinhood customer service regarding the massive underwater balance. However, his messages were met with automated replies, according to the complaint.
I wonder how the people who set up a brokrage dealing with people's hard earned money in such a way you couldn't get in contact with a human easily must feel after hearing this?
I get calls from Morgan Stanley just because a of a form error while initiating a transfer asking if I'd like them to do it for me, and RH is over here (wrongfully) telling people they're down almost a million dollars and then sending them to voicemail.
Even though it was a bug, you'd think there'd be some provision for this, like if an account suddenly went that far in the negative they'd freeze the account and contact you immediately (and yes, people will point out that means they can't sell if it bounces back, but if you actually owe RH 750k I'm pretty sure all your positions will be liquidated before you can cough...)
> The suit says that Kearns made three attempts to contact Robinhood customer service regarding the massive underwater balance. However, his messages were met with automated replies, according to the complaint.
I wonder how the people who set up a brokrage dealing with people's hard earned money in such a way you couldn't get in contact with a human easily must feel after hearing this?
I get calls from Morgan Stanley just because a of a form error while initiating a transfer asking if I'd like them to do it for me, and RH is over here (wrongfully) telling people they're down almost a million dollars and then sending them to voicemail.
Even though it was a bug, you'd think there'd be some provision for this, like if an account suddenly went that far in the negative they'd freeze the account and contact you immediately (and yes, people will point out that means they can't sell if it bounces back, but if you actually owe RH 750k I'm pretty sure all your positions will be liquidated before you can cough...)
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> RH is over here (wrongfully) telling people they're down almost a million dollars and then sending them to voicemail.
Perhaps they're hoping to be the Google of the finance industry /s
Perhaps they're hoping to be the Google of the finance industry /s
I don't know why you are getting downvotes, that's exactly who they drew inspiration from here.
Is it that bad?
I love Google, use it all the time.
It's easy to complain, lots of companies tried and failed to comlete with it.
I love Google, use it all the time.
It's easy to complain, lots of companies tried and failed to comlete with it.
They are notorious for having no human support.
Sure, just like a toothbrush (Larry Page's favourite comparision for products). The only way to scale to all people in the world is to not have human support.
If toothbrushes were so great, Page would be in the toothbrush industry and their support models would be relevant.
Please stop spreading this lie. It's a falsehood I see on HN almost every single day.
I have received almost immediate support from a real human every single time I've contacted Google (dozens of times). This includes chat, email, and even phone support initiated by them... and I live in the a "third world" country in the middle of the Pacific Ocean, and earn them no more than two figures a month.
In my experience, Google provides stellar support.
I have received almost immediate support from a real human every single time I've contacted Google (dozens of times). This includes chat, email, and even phone support initiated by them... and I live in the a "third world" country in the middle of the Pacific Ocean, and earn them no more than two figures a month.
In my experience, Google provides stellar support.
> In my experience, Google provides stellar support.
This is anecdotal. Here is a high-profile counter-experience to yours:
https://news.ycombinator.com/item?id=26061935
When dealing with large companies we must consider trends, not individual points. This same line of thinking is what causes climate-change-deniers to point at snow on the ground and say its all a hoax.
This is anecdotal. Here is a high-profile counter-experience to yours:
https://news.ycombinator.com/item?id=26061935
When dealing with large companies we must consider trends, not individual points. This same line of thinking is what causes climate-change-deniers to point at snow on the ground and say its all a hoax.
People's who have had their livelihoods destroyed by random AdWords and Google Play Store bans with zero recourse but hoping they get traction on Twitter might disagree...
In fact wasn't the Terraria developer who randomly got banned by Google just on the front page yesterday?
In fact wasn't the Terraria developer who randomly got banned by Google just on the front page yesterday?
If only he'd realized that he could declare bankruptcy, he might not have been so overwhelmed. I think it wrecks your credit for about 7 years (?), but it's not the end of the world. This is so sad.
Maybe the parents could have tried harder to educate their kid about financial risk and consequences.
I'm sure they will spend their lives wishing that they could go back in time and do so.
However, it's impossible to see every risk that comes the way of your loved ones.
However, it's impossible to see every risk that comes the way of your loved ones.
I feel this comment is a mean platitude, given that most people on HN do not understand options trading and probably you are one of them. I am.
The "kid" was 20. An adult man. How much insight do you suppose the parents had into his financial activities?
The thing is, he actually probably would've made some profit on that trade (or a small loss) after it all was said and done. He had a spread position, but only one leg of that spread was executed, while the other was still pending. So while the second leg is pending, the UI would only show one on the chart (while the other one is clearly marked in the UI as still active). Until that second leg is executed too, you will see that weirdness on the chart. But if you know how spreads work even on the most basic level, you will easily understand that this is not the actual balance of your account, it is just the pending balance until the other leg is executed. And the other leg was guaranteed to be executed, so it isn't like there was some uncertainty about that. All it takes is one business day tops for the second leg to get processed. For those curious, there are other comments in previous threads that explain the situation in much better detail, such as this one. [0]
This is a very known thing with spread positions, can be verified by just googling for a few minutes. And while his death is a tragedy that was easily avoidable, I don't think that it is fair to blame RH for this man's failure to do less than a few minutes of googling.
Important to note, this isn't unique to RH, this is pretty much how every broker displays that specific kind of a trade in their UI. And it isn't because they are all bad at UI, but because it is indeed an accurate representation of the state of the account at that moment. You just gotta make sure you actually understand the information you are looking at. And if you are doing option spreads with even the most basic knowledge of those, you should already be able to easily understand what those charts are actually displaying.
Not even mentioning that the parents claim he opened a trading account and started trading options as a college freshman, which is kind of impossible to get an approval for from RH (or any other broker) unless you make a lot of money already or lie on the application. And we know he didn't make a lot of money, because some of the headlines on the matter have mentioned "RH trader with no income manages to open a $750k position". So he indeed went around the rules (and the law) by lying to get a permission from the broker to trade options. Not trying to blame him for what happened, the situation is just unfortunate all around. I am simply struggling to think of anyone who could be honestly and justly blamed for this situation, aside from, maybe, his parents. But even that is a stretch.
0. https://news.ycombinator.com/item?id=23554588
This is a very known thing with spread positions, can be verified by just googling for a few minutes. And while his death is a tragedy that was easily avoidable, I don't think that it is fair to blame RH for this man's failure to do less than a few minutes of googling.
Important to note, this isn't unique to RH, this is pretty much how every broker displays that specific kind of a trade in their UI. And it isn't because they are all bad at UI, but because it is indeed an accurate representation of the state of the account at that moment. You just gotta make sure you actually understand the information you are looking at. And if you are doing option spreads with even the most basic knowledge of those, you should already be able to easily understand what those charts are actually displaying.
Not even mentioning that the parents claim he opened a trading account and started trading options as a college freshman, which is kind of impossible to get an approval for from RH (or any other broker) unless you make a lot of money already or lie on the application. And we know he didn't make a lot of money, because some of the headlines on the matter have mentioned "RH trader with no income manages to open a $750k position". So he indeed went around the rules (and the law) by lying to get a permission from the broker to trade options. Not trying to blame him for what happened, the situation is just unfortunate all around. I am simply struggling to think of anyone who could be honestly and justly blamed for this situation, aside from, maybe, his parents. But even that is a stretch.
0. https://news.ycombinator.com/item?id=23554588
Thank you for informative post, however I feel you are being unfair to the kid.
"this man's failure to do less than a few minutes of googling" is true if you know what to google, but not if you are clueless.
Setting up OAuth is a few minutes of googling to me, but not to the boss of my boss.
"this man's failure to do less than a few minutes of googling" is true if you know what to google, but not if you are clueless.
Setting up OAuth is a few minutes of googling to me, but not to the boss of my boss.
>however I feel you are being unfair to the kid
I agree with you overall, but I don't think I am being unfair to the kid. That's the entire reason why I am extremely hesitant to say that it was all his own fault. I don't think it was purely his fault. And there is a reason safeguards for trading options exist, but he was smart enough to google what specifically he should lie about on that application to get the permission for trading options from his broker.
>"this man's failure to do less than a few minutes of googling" is true if you know what to google, but not if you are clueless.
>Setting up OAuth is a few minutes of googling to me, but not to the boss of my boss.
Makes perfect sense. But if the boss of your boss goes around the company rules, gets access to modifying live prod (by lying to whoever is in charge of granting permissions), and then makes some clueless changes to OAuth in prod that end up bringing down the entire auth infrastructure, I don't think it would be fair to blame OAuth for this. Not a perfect analogy, given that the kid didn't actually blow his account, he just couldn't read the charts for the type of options he was trading. But the main point of what i am trying to illustrate with that analogy still holds.
I agree with you overall, but I don't think I am being unfair to the kid. That's the entire reason why I am extremely hesitant to say that it was all his own fault. I don't think it was purely his fault. And there is a reason safeguards for trading options exist, but he was smart enough to google what specifically he should lie about on that application to get the permission for trading options from his broker.
>"this man's failure to do less than a few minutes of googling" is true if you know what to google, but not if you are clueless.
>Setting up OAuth is a few minutes of googling to me, but not to the boss of my boss.
Makes perfect sense. But if the boss of your boss goes around the company rules, gets access to modifying live prod (by lying to whoever is in charge of granting permissions), and then makes some clueless changes to OAuth in prod that end up bringing down the entire auth infrastructure, I don't think it would be fair to blame OAuth for this. Not a perfect analogy, given that the kid didn't actually blow his account, he just couldn't read the charts for the type of options he was trading. But the main point of what i am trying to illustrate with that analogy still holds.
> "he was smart enough to google what specifically he should lie about on that application to get the permission for trading options from his broker."
That's a tough one, but I presume he did try to google things before offing himself? Or do you think he just panicked?
We've had issues with people lying on online prescription forms in the UK and getting opioids and other controlled substances. Once one person has got them, the 'right answers' spread online and tons of less-informed folks get in. I don't think you can rely on any online form without checking documents.
That's a tough one, but I presume he did try to google things before offing himself? Or do you think he just panicked?
We've had issues with people lying on online prescription forms in the UK and getting opioids and other controlled substances. Once one person has got them, the 'right answers' spread online and tons of less-informed folks get in. I don't think you can rely on any online form without checking documents.
>but I presume he did try to google things before offing himself? Or do you think he just panicked?
Total guess and speculation, but I think it is the latter. Because, at the time when this happened, I knew way less about option spreads than he did (I only knew that it involved two option legs), so I decided to search online to find out whether what he saw on the chart was normal or not.
Took me barely a few mins until I found a bunch of posts with people asking a similar question at many random points in time, with answers confirming that it was totally normal. And that was with my almost-non-existent level of knowledge about option spreads.
>We've had issues with people lying on online prescription forms in the UK and getting opioids and other controlled substances. Once one person has got them, the 'right answers' spread online and tons of less-informed folks get in. I don't think you can rely on any online form without checking documents.
Solid point, but most people can easily guess "correct" answers for brokerages specifically. It is just about earnings, and your experience with options. Maybe a few other basic questions of a similar type, like your employment situation or your personal risk assessment of your profile (been a while for me, so I forgot the details). Since it is a multiple-choice dropdown, you can just pick a really high earnings number and then for the other question pick "multiple years of experience trading options" (or something like that). While with your opioid example, i can totally imagine what kind of an advice people online would give, since the situation with that is a bit less trivial.
To be honest, however, I assumed they were checking this info on some level before granting a permission to trade options. But I am not gonna comment on that, as I have zero knowledge of how they process those permission checks. My permission for options was granted naturally through trading for a couple of years and slowly getting more accustomed to the whole process, so I didn't give much thought to that process.
Total guess and speculation, but I think it is the latter. Because, at the time when this happened, I knew way less about option spreads than he did (I only knew that it involved two option legs), so I decided to search online to find out whether what he saw on the chart was normal or not.
Took me barely a few mins until I found a bunch of posts with people asking a similar question at many random points in time, with answers confirming that it was totally normal. And that was with my almost-non-existent level of knowledge about option spreads.
>We've had issues with people lying on online prescription forms in the UK and getting opioids and other controlled substances. Once one person has got them, the 'right answers' spread online and tons of less-informed folks get in. I don't think you can rely on any online form without checking documents.
Solid point, but most people can easily guess "correct" answers for brokerages specifically. It is just about earnings, and your experience with options. Maybe a few other basic questions of a similar type, like your employment situation or your personal risk assessment of your profile (been a while for me, so I forgot the details). Since it is a multiple-choice dropdown, you can just pick a really high earnings number and then for the other question pick "multiple years of experience trading options" (or something like that). While with your opioid example, i can totally imagine what kind of an advice people online would give, since the situation with that is a bit less trivial.
To be honest, however, I assumed they were checking this info on some level before granting a permission to trade options. But I am not gonna comment on that, as I have zero knowledge of how they process those permission checks. My permission for options was granted naturally through trading for a couple of years and slowly getting more accustomed to the whole process, so I didn't give much thought to that process.
Or, as often said on WSB (like the numerous times people have accidentally discovered "infinite leverage" glitches), "Just delete the app!".
Seriously, people have done that - and Robinhood is too incompetent to follow up or take legal action.
Seriously, people have done that - and Robinhood is too incompetent to follow up or take legal action.
It's more likely they realize trying to collect on that money would kick off a protracted legal battle, which they might lose. Investors do have some protections, and a glitch allowing infinite leverage is a definite, absolute fuck-up on Robinhood's part, which might be exploitable in court, not to mention the bad publicity it'd bring. (E.g. Robinhood sues working family into bankruptcy over glitch in its own app.)
This is extremely sad. The lawsuit claims that Robinhood's shitty tech support was one of the major factors here. Between that, the numerous bugs, and the way they've been blocking people from trading in Gamestop, I can't understand why people choose to use it over the alternatives.
I've always done my trading through Schwab, and my experience has been worlds different from what I read in the news about Robinhood. Schwab hasn't restricted the trading of any stocks or options, and they make professional support as available as air. Whether it's technical issues or basic investment advice, I can easily get in touch with them by phone or email.
I've always done my trading through Schwab, and my experience has been worlds different from what I read in the news about Robinhood. Schwab hasn't restricted the trading of any stocks or options, and they make professional support as available as air. Whether it's technical issues or basic investment advice, I can easily get in touch with them by phone or email.
I just opened up my margined account on Interactive Brokers and it shows a large negative cash balance (exactly equal to what I borrowed on margin). I guess an inexperienced trader could've mistaken the negative cash balance as having negative equity value. Alex Kearns had a negative cash of -730k but a positive equity of $16k . Why did Robinhood send him an email asking for $170k in a few days?
Then later after his death, he received another email from Robinhood:
"Great news! We're reaching out to confirm that you've met your margin call and we've lifted your trade restrictions."
Did Robinhood's margin call system make a mistake?
Then later after his death, he received another email from Robinhood:
"Great news! We're reaching out to confirm that you've met your margin call and we've lifted your trade restrictions."
Did Robinhood's margin call system make a mistake?
You don't know that you're assigned until the day after it happens. Even if you immediately exercise offsetting options upon notification of assignment, it takes a business day to clear out the shares.
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Allegedly he had a trade set up with multiple legs. He wrote some puts and bought some mostly-offsetting puts. He got assigned on the puts he wrote, but the profit from the other leg of the trade didn’t show up in his account until the next business day.
I've had this happen after getting assigned on a short leg. Massive negative balance in the UI, locked account, angry margin call emails from RH.
The messaging around this is terrifying because it is all boilerplate risk management stuff -- nothing you'd expect if you were naively engaged in a controlled risk spread.
The thing to keep in mind is that RH won't let you engage in infinite risk positions. So, if this happens, take a deep breath and maybe re-read a few sections on Investopedia.
The messaging around this is terrifying because it is all boilerplate risk management stuff -- nothing you'd expect if you were naively engaged in a controlled risk spread.
The thing to keep in mind is that RH won't let you engage in infinite risk positions. So, if this happens, take a deep breath and maybe re-read a few sections on Investopedia.
I haven't been following this, so I don't have a lot of context, and a quick google doesn't tell me if he had student loans or much of anything about the context of his life.
Some initial thoughts that may be wildly off the mark:
1. Is it pertinent that he was a college student in a world where student loans are eating the futures of students while not giving them the good careers they thought it guaranteed?
2. Is it pertinent that the rich have gotten richer and the poor have gotten poorer during the pandemic? It's kind of a winner-take-all economy and we just crap all over everyone else and then blame them as lazy whiners who need to try harder and basically tell them "shut up!" if they try to point out "I'm doing all I can and it's never enough because the system is broken."
3. If you aren't one of the "winners" you get kind of this dystopian reality where you can't get health coverage, you can't get housing, once you are homeless no one wants to hire you so escaping seems nigh impossible, etc.
4. We have raised the ceiling on our economy and put in no floor. Then we wonder when folks slip through the cracks.
5. If you have overwhelming real world problems such that it makes you think suicide is your only option and you try to talk to someone, you will most likely be dismissed as "mentally ill" for being suicidal.
This is tragic and I assume Robinhood does need to handle things differently, but I can't help but wonder what this says about or how this relates to other societal issues in the US today.
Some initial thoughts that may be wildly off the mark:
1. Is it pertinent that he was a college student in a world where student loans are eating the futures of students while not giving them the good careers they thought it guaranteed?
2. Is it pertinent that the rich have gotten richer and the poor have gotten poorer during the pandemic? It's kind of a winner-take-all economy and we just crap all over everyone else and then blame them as lazy whiners who need to try harder and basically tell them "shut up!" if they try to point out "I'm doing all I can and it's never enough because the system is broken."
3. If you aren't one of the "winners" you get kind of this dystopian reality where you can't get health coverage, you can't get housing, once you are homeless no one wants to hire you so escaping seems nigh impossible, etc.
4. We have raised the ceiling on our economy and put in no floor. Then we wonder when folks slip through the cracks.
5. If you have overwhelming real world problems such that it makes you think suicide is your only option and you try to talk to someone, you will most likely be dismissed as "mentally ill" for being suicidal.
This is tragic and I assume Robinhood does need to handle things differently, but I can't help but wonder what this says about or how this relates to other societal issues in the US today.
He was an adult and he's responsible for his own decisions. We can't turn the world into safe space for every poorly equipped adult.
This is not to lessen the tragedy of this situation in any way. Acknowledging a tragedy doesn't have to involve trying to find a sue-able party to blame it on.
This is not to lessen the tragedy of this situation in any way. Acknowledging a tragedy doesn't have to involve trying to find a sue-able party to blame it on.
People have to start owning up to their decisions. Unfortunately, society has deemed suicide as acceptable. Where's the role of the parents to teach their children not to commit suicide? Shifting blame like this is not going to solve anything.
Note that I'm not excusing the current financial system that has basically become legalized gambling more or less (like options and shorting).
Note that I'm not excusing the current financial system that has basically become legalized gambling more or less (like options and shorting).
It’s such a hard balance between regulation to protect the people vs freedom of will. I’m not entirely sure what’s the solution is but RH is definitely inching towards user exploitation.
It's one thing (a quite annoying thing) for free non-monetary services to not have phone support, but a service that houses your money is inexcusable.
Stock market investment services should be treated same way as gambling. Warren Buffet's long bet with hedge funds proves it is nothing more than that.
The real question is whether it would have been better or worse for the case if he actually had lost 700k.
Sad case but a completely inappropriate lawsuit. As society we allow people to chose to take risks they are comfortable with (otherwise everyone would be locked up in their homes wrapped in bubblewrap.)
I am not a RH user but I expect that to get started you have to transfer in money. To do anything with leverage (options, etc.) you certainly have to opt-in to additional agreements including indicating that you understand the risks, etc. Ultimately the steps of "wiring money in" or accepting "I understand I can lose more than I invested" should trigger something in your brain. And if it doesn't unfortunately you have to pay the price rather than somehow making the whole activity illegal.
Obviously this is a terrible situation for the family, but it's also a reminder that parents need to teach their kids common sense. For example: there's no free lunch. If your kid at 20 has the brain that says "oh duh there's free money here" you kinda messed up.
I am not a RH user but I expect that to get started you have to transfer in money. To do anything with leverage (options, etc.) you certainly have to opt-in to additional agreements including indicating that you understand the risks, etc. Ultimately the steps of "wiring money in" or accepting "I understand I can lose more than I invested" should trigger something in your brain. And if it doesn't unfortunately you have to pay the price rather than somehow making the whole activity illegal.
Obviously this is a terrible situation for the family, but it's also a reminder that parents need to teach their kids common sense. For example: there's no free lunch. If your kid at 20 has the brain that says "oh duh there's free money here" you kinda messed up.
I think the lawsuit has more to do with RH accidentally showing a debt of 700k than actually letting people lose 700k on margin.
It will be settled out of court.
It will be settled out of court.
How about this for common sense: Don't kill yourself. Especially not over something as trivial as money.
This entire disaster will be the end of robinhood, and frankly it couldn't happen to more deserving people.
Kharma is a bitch, and when you build a business based on virtue signaling and lies you had better expect for it to come back and bite you.
Kharma is a bitch, and when you build a business based on virtue signaling and lies you had better expect for it to come back and bite you.
You have to go out of your way to trade options (they're disabled by default), and the only way you can get options enabled in Robinhood as a college freshman is to straight up lie on the application.
> “Worse, Robinhood provided almost no investment guidance, and its customer ‘service’ was virtually non-existent, consisting of automated e-mail replies devoid of any human contact or interaction,” the family alleged in the suit.
How many brokers provide investment guidance? How many do it without additional fees?
I've only reached out to Robinhood two or three times but a person has responded to the initial inquiry in all but one instance (where an automated email just said it would be a while, and a person followed up about a week later to actually address the issue).
Robinhood is a shit company and I look forward to incoming class action lawsuit but this is a grieving family lashing out and should be dismissed. If anything comes of this the only thing that's going to happen is there are going to be more roadblocks for retail investors to invest.