How can "regular people" get 700k in debt on RobinHood


The trader, holding put-writes and that according to one source, was expected to buy a position larger than the cash in the account. But that position could be immediately sold such that there is merely some amount of loss on the position.

So the trader could have just bought the put-write back for some amount of loss. Or allow the exercise, sell the stock without ever paying for it, and have a trading violation but a smaller negative value in the account.


I'm sure more details will come out in the future, but based on the note that was left, the person thought the orders would cancel out with a minimal loss. One leading theory is simply that both orders hadn't been completely fulfilled at the time, so the account was showing a large negative balance just temporarily. If that's true, then had the orders completed in the opposite order, then perhaps there would have been a spending spree to answer for instead of a tragedy. If it turns out that this is indeed what happened, then an additional "pending" line would probably be a good idea, similar to how most banks and credit card accounts show pending transactions that haven't cleared yet.


I disagree with simply blaming Robinhood for that, all that's getting accomplished is that they will block people from doing risky investments, also the ones that know what they are doing.

When the guy was authorized to trade options, he signed papers claiming the has experience with it, and that he understands the risks.
Too many people sign such papers blindly, without any thought, because they got used to the american way - 'nothing bad can happen, and if it does, I'm going to blame the company for it'.

If Robinhood wants to offer option trading, what else could they do? send a guy to interview you if you know what you are doing??

Chances are that trader either had that money, or at least half of it (and the rest as a margin account), and blundered it away - or the story is overhyped balooney.

Lesson: if you don't know what you're doing, and you get warned in written, don't do it. Or live with consequences, and don't blame others for your stupidity.

[I'm sorry he is dead, because there was no need for it - the loss might not be real, and even if, it's not a reason to die]