Honestly, this doesn't surprise me at all. The interface in Robinhood makes me think it can only be useful for people that have 0 idea what they are doing. Case in point: their graphs (at least on Android) have no labled Y axis! Seriously, WTF.
> their graphs (at least on Android) have no labled Y axis!
It's the same on iOS.
I can't say I'm happy with Robinhood. It's dumbing down something that can get you into a world of financial pain if you don't know what you're doing.
If they want to target people that don't understand what they are playing with, they shouldn't be giving away options/crypto access/margin buying to people that don't understand those concepts. Expect a lot of people to lose a lot of money. /r/stupidfinance has some pretty great posts in which people were left in the cold after playing with fire in RH.
I know very little about stock trading. I shouldn't get in a world of financial pain if I don't trade on margin (Robinhood Gold Buying Power) and only transfer money I can afford to lose right?
That is treating Robinhood like a casino. I recognize I don't know what I'm doing at the casino. Therefore I don't use a credit card to buy casino chips and I have a hard stop-loss of a couple hundred bucks that's budgeted as entertainment money.
Seriously maddening : ( How hard was it to put the ticks on the axis? So that at least I can gauge how big the changes are? Those graphs are comically useless...
It's wrong because we don't want to simplify concepts to a level beneath the minimum information needed for understanding them. Call and Put specifically refer to what happens on maturity or exercise of the contract. You either call the stock from the counterparty, or you put it to the counterparty.
The only reason we don't refer to them as "buy" and "sell" options is because you can both buy and sell either of them. Nobody wants to shout into a phone "buy 10,000 AAPL Jan19 100 sells," and hope that the broker on the floor gets it right.
In actual fact, a call doesn't just represent "I think it will go up." Nor does the holder of a call always make money when the stock appreciates in value.
They are volatility products, and they decay with time. If you buy a put before a catalyst with a 9% implied move, and the stock drops 2%, you probably just lost money on event theta as the vol resets. How do you explain that a down option can lose money on a down move?
Giving a false sense of simplicity probably will tempt more folks into making losing trades on options.
How many people who trade options actually call up the shares at the end or vice versa? I'd imagine very few and even fewer on Robinhood's platform. I think a level of abstraction that clarifies things is fine.
Isn't tempting people into making losing trades the point, though? Robin Hood presumably has some way of profiting from trades which does not include directly charging people, such as commissions. So the more confused novices are, the more valuable they are as resources whose money can be systematically extracted by counterparties.
Options are relatively complex instruments with an enormous amount of risk involved. If you can’t understsnd the difference between “call” and “put” will you understand strike price and expiration date and that you will literally lose 100% of your money if an option ends up out of the money on the expiration date? I doubt it.
For example, Robinhood calls Facebook July puts that are 10% out of the money “medium risk.” In other words if Facebook doesn’t go up 10% by July you lose all your money.
Options are very high risk, high reward plays. Making that more accessible is... risky.
> What's wrong with removing the jargon from stock trading?
Because you're removing all specificity from it at the same time.
If you show me that screenshot without the text in the tweet, I'd have no idea what action it actually refers to. It could mean you're buying or selling an option. Or it could mean you're buying or selling a stock (potentially short selling). It could even mean you're buying stock on margin.
In fact, buying a call option is probably not even the most reasonable interpretation of "I think that this stock will go up", because purchasing the stock outright would be the default workflow. Especially since it doesn't even specify a timeline for the option[0]! Am I betting that it will go up today? Next week? Next month? Next year? There is literally no way to tell from that display.
And quite honestly: if you know about the distinction between buying equity and buying a call option, you will care about the difference between the two. And if you don't know about the distinction, you have no business trading options, because you'll undoubtedly screw yourself over.
[0] Timelines matter less than you'd think, because you can sell an option early to recoup its value and call options are always worth more alive than dead[1]. But it still matters, because buying an option that expires in a month is a very different bet from buying an option that expires in a year.
[1] In other words, you never exercise an option early even in markets where it's permitted.
I thought when you were approved for option trading you had to read and at least claim you understood "the Characteristics & Risks of Standardized Options". I didn't even know it was legal to simplify things to this extent.
So much BS in your post and most of everyone ("elitist") here. If someone came here say this kind of thing about programming they would be voted to hell.
ie. If you do not know how pointers work you have no busines programming because you'll undoubtedly screw your app.
The trouble is that Robinhood has a very low barrier of entry and now you have laymen who, if they don't understand basic finance terms, likely do not understand the fundamentals of trading options.
The terms are out dated. I disagree with "up" and "down" because that is even more wrong (I'm up for buying that stock like I'm up for a game of chess, and I'm down to sell these like I'm down to go to the movies? Is that what they mean? Way too colloquial for my liking).
Just be more descriptive instead of trying to re-purpose other words. A "call" should be "Buy on Date", abbreviated to BOD, and a put should be "Sell on Date", or SOD. You don't even need to google what the means, you can immediately understand it when you read it.
The medical field is going through a similar renaming. Doctors in the early stages of modern medicine would discover something and name it after themselves. Oppenheimer Test? Wtf is that you egotistical douche, just call it the tibia tickle test.
and the high vs medium risk statement is, at best, debatable.
If this is real, can anyone shed light on how they ensure a user has the capital required to purchase options? ie if I purchase 1 calls of GOOG and they expire ITM what does Robin Hood do if I dont' have $10,000 in cash for the exercise?
> ie if I purchase 1 calls of GOOG and they expire
There shouldn't be holding requirements for going long on options. At the most you lose your hypothetical gains (tho, wouldn't most brokers be nice enough to automatically exercise-and-sell for you for a small commission?)
As if we needed another reminder that Wall Street is a casino underwritten by the taxpayers. A welfare program run by the Fed for the rich. A market for fools, not a necessary institution to capitalize business.
Readit News
It's the same on iOS.
I can't say I'm happy with Robinhood. It's dumbing down something that can get you into a world of financial pain if you don't know what you're doing.
If they want to target people that don't understand what they are playing with, they shouldn't be giving away options/crypto access/margin buying to people that don't understand those concepts. Expect a lot of people to lose a lot of money. /r/stupidfinance has some pretty great posts in which people were left in the cold after playing with fire in RH.
That is treating Robinhood like a casino. I recognize I don't know what I'm doing at the casino. Therefore I don't use a credit card to buy casino chips and I have a hard stop-loss of a couple hundred bucks that's budgeted as entertainment money.
The only reason we don't refer to them as "buy" and "sell" options is because you can both buy and sell either of them. Nobody wants to shout into a phone "buy 10,000 AAPL Jan19 100 sells," and hope that the broker on the floor gets it right.
In actual fact, a call doesn't just represent "I think it will go up." Nor does the holder of a call always make money when the stock appreciates in value.
They are volatility products, and they decay with time. If you buy a put before a catalyst with a 9% implied move, and the stock drops 2%, you probably just lost money on event theta as the vol resets. How do you explain that a down option can lose money on a down move?
Giving a false sense of simplicity probably will tempt more folks into making losing trades on options.
For example, Robinhood calls Facebook July puts that are 10% out of the money “medium risk.” In other words if Facebook doesn’t go up 10% by July you lose all your money.
Options are very high risk, high reward plays. Making that more accessible is... risky.
Because you're removing all specificity from it at the same time.
If you show me that screenshot without the text in the tweet, I'd have no idea what action it actually refers to. It could mean you're buying or selling an option. Or it could mean you're buying or selling a stock (potentially short selling). It could even mean you're buying stock on margin.
In fact, buying a call option is probably not even the most reasonable interpretation of "I think that this stock will go up", because purchasing the stock outright would be the default workflow. Especially since it doesn't even specify a timeline for the option[0]! Am I betting that it will go up today? Next week? Next month? Next year? There is literally no way to tell from that display.
And quite honestly: if you know about the distinction between buying equity and buying a call option, you will care about the difference between the two. And if you don't know about the distinction, you have no business trading options, because you'll undoubtedly screw yourself over.
[0] Timelines matter less than you'd think, because you can sell an option early to recoup its value and call options are always worth more alive than dead[1]. But it still matters, because buying an option that expires in a month is a very different bet from buying an option that expires in a year.
[1] In other words, you never exercise an option early even in markets where it's permitted.
ie. If you do not know how pointers work you have no busines programming because you'll undoubtedly screw your app.
Just be more descriptive instead of trying to re-purpose other words. A "call" should be "Buy on Date", abbreviated to BOD, and a put should be "Sell on Date", or SOD. You don't even need to google what the means, you can immediately understand it when you read it.
The medical field is going through a similar renaming. Doctors in the early stages of modern medicine would discover something and name it after themselves. Oppenheimer Test? Wtf is that you egotistical douche, just call it the tibia tickle test.
I know people who actually think it's just about betting it go up or down, like the higher orders don't exist (the greeks).
I mean going up vs going down?
and the high vs medium risk statement is, at best, debatable.
If this is real, can anyone shed light on how they ensure a user has the capital required to purchase options? ie if I purchase 1 calls of GOOG and they expire ITM what does Robin Hood do if I dont' have $10,000 in cash for the exercise?
There shouldn't be holding requirements for going long on options. At the most you lose your hypothetical gains (tho, wouldn't most brokers be nice enough to automatically exercise-and-sell for you for a small commission?)
The problem is when you write options.
https://twitter.com/internetofshit or the defunct Read the Fucking HIG
I guess it's better than trading slaves.