If I had Robinhood account and I was young, foolish, and judgement proof I would try this. Actually I would open 2 accounts and simultaneously take opposite bets with calls on one account and puts on another account on a stock that's going to report earnings. And then cash out the account that wins and let the other account self destruct. And then move to a country that doesn't have extradition treaty with the US.
Anyone of you aware or following along Robinhood infinite margin cheat code discovered by WallStBet subforum on Reddit? I've been reading and following since end of last week and Robinhood still haven't patched the exploit and people are selling deep in the money covered calls to gain infinite margin. The guy who discovered the trick used $2k to margin like $58k in Apple put options day before earnings and blew up his account the next day. Couple people leveraged $4k into close to $1 million in options. Another guy used $15k and leveraged with Tesla stocks and calls for over $1 million leverage. Pretty crazy and funny stuff.
I've been trading online since early 1998. I've seen the platforms evolve over time. I've had many online brokers. This doesnt sound like a bug but a risky strategy.
Just buy 100 shares of a company and then sell a call against the position. Then take the call proceeds and buy 100 more shares of the same company and sell another call. Rinse, repeat.
In order to unwind the position you either wait to get your shares taken from you (calls exercised by the buyer) or you have to deposit funds to start buying back the calls you sold in order to dump the shares you bought. You might make money if you are trying to time decay a forward contract.
Otherwise you can buy back the calls if the stock goes down, if you have additional funds to do so. Your account will be wound so tight, its going to take a lot of money to unwind. If the stock goes down, you can buy the shorted calls back cheaper, however, you need additional funds. If the stock goes up, so do the shorted calls. The share price also has to go back up after you cover the short call in order to make a profit.
If you use the call proceeds to buy shares in other companies and it goes against you.....with the amount of leverage you are using....$4k on $1mm sounds like a recipe for a bankruptcy filing.
No thanks.
I started trading before there were online brokers. Soon as I turned 18, I opened my brokerage account. There was only like one or two discount brokerages back then. I used Waterhouse Securities which later became TD Ameritrade. Back then, I had to manually call and speak with a broker to execute any stock trades. And it was expensive. Then they released automated phone setup so you could call and check stock quotes and buy and sell stocks and options using touch tone phone without talking to live broker. I used to call from street pay phone booths to trade stocks. I called so much I memorized all the menu and digits to access and check my favorite stocks without looking at the phone keypad. When online trading started getting big around 1997, I quit my day job to trade full time. Even though trades were so much cheaper online, I was still paying around $50k a year in commissions and margin interest. I did that full time for 5 years before the dotcom crash made me go back to real work.I've been trading online since early 1998. I've seen the platforms evolve over time. I've had many online brokers. This doesnt sound like a bug but a risky strategy.
Just buy 100 shares of a company and then sell a call against the position. Then take the call proceeds and buy 100 more shares of the same company and sell another call. Rinse, repeat.
In order to unwind the position you either wait to get your shares taken from you (calls exercised by the buyer) or you have to deposit funds to start buying back the calls you sold in order to dump the shares you bought. You might make money if you are trying to time decay a forward contract.
Otherwise you can buy back the calls if the stock goes down, if you have additional funds to do so. Your account will be wound so tight, its going to take a lot of money to unwind. If the stock goes down, you can buy the shorted calls back cheaper, however, you need additional funds. If the stock goes up, so do the shorted calls. The share price also has to go back up after you cover the short call in order to make a profit.
If you use the call proceeds to buy shares in other companies and it goes against you.....with the amount of leverage you are using....$4k on $1mm sounds like a recipe for a bankruptcy filing.
No thanks.
I started trading before there were online brokers. Soon as I turned 18, I opened my brokerage account. There was only like one or two discount brokerages back then. I used Waterhouse Securities which later became TD Ameritrade. Back then, I had to manually call and speak with a broker to execute any stock trades. And it was expensive. Then they released automated phone setup so you could call and check stock quotes and buy and sell stocks and options using touch tone phone without talking to live broker. I used to call from street pay phone booths to trade stocks. I called so much I memorized all the menu and digits to access and check my favorite stocks without looking at the phone keypad. When online trading started getting big around 1997, I quit my day job to trade full time. Even though trades were so much cheaper online, I was still paying around $50k a year in commissions and margin interest. I did that full time for 5 years before the dotcom crash made me go back to real work.
Now, I'm older and my balls are now size of grapes instead of watermelons. So I don't have the stomach or the balls to do the stuff I used to do. I'm happy to collect like $1k-$2k a month selling far out of the money covered calls on Tesla and selling naked puts. I could make far more if I was more aggressive and sold more covered calls closer to the money but I don't want to risk it with Tesla. I don't even like selling covered calls for more than 50% of my Tesla position.
I agree WSB Robinhood guys are morons for risking bankruptcy with insane leverage but if I was young and didn't have much money or assets, I would probably do it. Bankruptcy is only 7 years. They could sue me but if you never plan to work W2 job, you can be judgement proof. And if you hit on earnings options play which is basically coin flip, you could retire with the options winnings.
The dumb ones that's posting screenshots and bragging about it for karma points on WSB will probably be criminally liable. But there are probably dozens of people not posting. I say Robinhood is just as much in trouble with the law as the WSB autists. Robinhood is violating Reg T and probably bunch of securities law. Look at the user and risk profile of that person above who leveraged $3k to $1.7 million. He's listed as student with like zero experience, assets, and very low risk tolerance. And Robinhood still haven't fixed the bug which tells me they can't unless they shut the whole platform down in order to do so. Then you're going to be liable and piss off all users who can't trade or manage their positions. Robinhood is fucked.Yeah if I was young, dumb, and broke I would probably try this game...
But just like my car insurance liability maximums, I've cranked those up over the years because now I actually have assets that people can go after unlike before.
These people are nuts, aside from lawsuits and actions from Robinhood, I honestly wouldn't be surprised if they are criminally held accountable as well, no?
Another WSB autist leveraged $3k to $1.7 million. Most of these brave souls/fools are using AMD stocks and calls to leverage up since the stock price and calls are relatively cheap. I'm wondering if all these Robinhood morons buying AMD calls are triggering computer trading algos to jump in and also bid up AMD stock price the past couple of days. It's something to think about and keep an eye on to fade this move once Robinhood patches this exploit. But that might be easier said and done considering they haven't yet.
lol, RH is so dead
Eh, Warren isn't winning.
Eh, Warren isn't winning. I'm assuming the nominee will be Hillary if Biden can't get it done. But it sure should be a concern to the market that the next president won't be so willing to continue the pumping.
Hillary, seriously? Hillary isn't running.
lol. Elon Musk responds to David Einhorn's allegation and comments in Greenlight Capital's recent investor letter. I pretty much lost all respect for Einhorn as an investor when I saw how clueless he was with Tesla. I hope that moron stays short Tesla. I want to see him burn in the coming years.
If you read Unicorn's reply to Musk, he's basically accusing Tesla of being a fraud and cooking the books. If that's Unicorn's argument and the reason he's shorting Tesla, well good luck with that. Meanwhile, Tesla is going to build new Gigafactory 4 in Berlin, Germany. What kind of Ponzi company with no demand is building yet another gigantic factory? This time in Europe.You know what they say, the market can remain irrational longer than you can stay solvent.
this the same guy that shorted Herbalife for $Billions$?If you read Unicorn's reply to Musk, he's basically accusing Tesla of being a fraud and cooking the books. If that's Unicorn's argument and the reason he's shorting Tesla, well good luck with that. Meanwhile, Tesla is going to build new Gigafactory 4 in Berlin, Germany. What kind of Ponzi company with no demand is building yet another gigantic factory? This time in Europe.
Tesla is going to takeover the world.
If you read Unicorn's reply to Musk, he's basically accusing Tesla of being a fraud and cooking the books. If that's Unicorn's argument and the reason he's shorting Tesla, well good luck with that. Meanwhile, Tesla is going to build new Gigafactory 4 in Berlin, Germany. What kind of Ponzi company with no demand is building yet another gigantic factory? This time in Europe.
Tesla is going to takeover the world.
In other news AMD hits all time high, record P/E ratio of 192 (trailing) and 33 forward. That may seem reasonable, however their profit margin is 3.50 - 6.00%.
In comparison, Apple has a forward P/E of 17 and profit margin of 25%.
Intel has a forward P/E of 12.5 and profit margin of 27-30%.
Im thinking AMD is overbought ATM.