I don’t think so. Someone sold a box spread and went $50k in the hole on like $1k in their account. There have been several different glitches so him being $700k in the red wouldn’t be shocking.
To trade options on RH all you have to do is verify you aren’t a financial professional and away we go.
Yup, this story reminded me of another one from a few years ago:
Basically, he shorted some biotech stock that went up 800% overnight. I think a lot of people just don’t understand why they make you open a margin account if you want to short-sell stocks. As the article mentions:
When you’re long, the worst you can do is lose is everything. But when you’re short, everything and a lot more is at stake.
For bankruptcy being no joke, rich people sure exploit it quite often and seem to stay rich. Heaven forbid the “dumb proletariat” figures out how to game the system that is exploiting and profiting off their labor
In some states you can declare bankruptcy and keep your house regardless of value. In Florida you can own a house worth $100,000,000 and creditors can’t touch it. LAW AND ORDER! PERSONAL RESPONSIBILITY!
Isn’t that what OJ did?
OJ has a pension from the NFL that the judgement couldn’t touch.
This makes more sense, if it was tied to an asset price going negative unexpectedly.
I am approved for options in my Ameritrade account but I had sign a form with all sort of information about income, assets, investing experience which they used to determine my level. The level they approved me at, it wouldn’t be possible for me to lose an amount where I would prefer bankruptcy.
If Robinhood just approves people for like 50x margins without such disclosure requirements, yikes.
Yeah that’s insane. All my trading so far has been in retirement accounts, so there’s no margin. The only thing I have is to be able to use unsettled funds, and since it’s a retirement account if I use them I have to hold the position for like 90 days or pay a penalty.
It’s also gotta be horrible business if RH is doing this - he’s not going to be the only one who loses more than he can pay. If this is true, they’re going to be out this $700K and likely facing a lawsuit from the family, or settling for a 7 figure payout to avoid the bad PR.
Futures opened -1.3%
I remember being a kid trying to get an entire pool raft underwater. I’d sit on it, then use my hands and feet to push as much of it down as possible. Somehow one section would always slip free and shoot back up to the surface.
’
That’s what stonks feel like these days - with the Fed functioning as the force of buoyancy. Or something.
Dow 28k - that’s my new target to sell all my non-international index funds and be in 1/3 cash or so. Maybe sell off some of my individual stonks - get to 1/2 cash. Can’t get too greedy.
So apparently stonks jumped from being way down in the morning to ending up on the day because the fed is apparently going to buy a shit-ton of corporate bonds.
Nice market we have here.
Does anyone else think of the stock market as a recursive sequence?
ie: Today’s Valuation = Yesterday’s Valuation + Impact of Today’s News
It’s quite a bracing time when we have almost no faith in yesterday’s valuation, nor ability to contextualize what today’s news even means.
I can see no way this volatility will end in 2020. It basically is a question of how much the government will support stock prices. Pricing that question during an election year and a pandemic is insanity. It’s literally a gambling game.
I’ve never had any faith in valuations. The DOW nearly doubled from 2016 to 2020. My goal has always been to ride the wave and hopefully exit the game of musical chairs before the music stops.
I still wonder if maybe money is worth less because there’s so much more of it in supply and in the hands of rich people who don’t know what else to spend it on. I don’t care if inflation technically isn’t going up because of milk and big screen TVs or w/e they use now. Pretty much everything else you spend significant money on - education, healthcare, housing - all went up a lot.
And of course things really rich people spend money on like NYC penthouses or sports teams have gone up like 100 fold in the last 30-40 years. I guess it makes sense that stonks would go up in nominal value too, since rich people like to buy those and there isn’t unlimited supply. Actual sensible P/E valuations by historical measures seem to have left the arena a long time ago.
It feels to me like the entire US economy is a multi-generational ponzi scheme that will come crashing down as soon as we aren’t the world’s reserve currency anymore.
That makes money worth more, not less. The velocity of a billion dollars is way lower in the hands of a billionaire saturated with mansions and cars and planes than in a thousand one million dollar lottery winners.
Although that same thing could drive up the value of equities.
Right. That’s what I was stumbling towards after a bunch of edits.
The critical point is that all asset prices are inversely related to the expected rate of return. As a simple example, a perpetual, risk-free bond that pays $X a year in interest has a value equal to $X divided by the discount rate for that asset (generally, the discount rate equals the amount of interest you’d demand to get paid a dollar next year instead of this year). If the discount rate for an asset falls by half, with nothing else changing, the value of the bond increases by 100%, purely as a matter of accounting.
A lot of apparent STONKS craziness is just people interpreting price moves that are about the discount rate as actual being about whether “the economy” is good or bad. The economy is certainly bad right now. At some point, the economy will certainly be better. The value of owning a share of stock bundles together owning the stock during the current bad times but also during the future good times. That value could go up or down because the market perceives that the good/bad times will be better/worse than people think, but it will also go up or down if people become more or less long-term in their outlook.
Two more facts about discount rates. Because the relationship between discount rates and valuations is inverse, as the discount rate gets lower and lower, the impact of the discount rate dominates fundamentals. If the discount rate falls by a percentage point from 10% to 9%, the impact on value is a ~10% increase. If the rate falls from 1.5% to 5%, it’s a 200% increase. And vice versa. Falling rates automatically increase volatility. Second, because discounting is exponential, the effect disproportionately weights far-future cash flows. In a 10% discount rate environment, a company that has a risk-free plan to start generating $1bn a year in 10 years is worth around $3.5bn today. In a 1% discount rate environment, it’s worth $90bn, or 25x as much.
I think your take is basically right though. People are desperate to put money in something that will provide for them 10 years from now, but there aren’t enough assets that can do that. A little ominous…
Wherein the stock market is compared to the TV show Jackass, where the goal is to make money in the most absurd way possible. Ties into Hertz and WallStreetBets.
https://twitter.com/adanthar/status/1272247785102983169?s=19
Disclaimer: I’m not an expert, I’m just intelligent and good at math.
For anyone with after hours trading, check out BSET (Bassett Furniture). I got them just before close at $6.85 per share, their net-net (liquidation value) in their last earnings report was $8.52 per share.
There’s a retail sales report out tomorrow morning at 8:30am EST, I expect furniture overall to do better than expected. Meanwhile, 66 of Bassett’s 103 stores are in states that were early to re-open and they have an earnings report June 30. Q1 they did 12 cents per share, analysts are projecting -55 cents per share. But 2/3 of their stores have already been open for a while, I think furniture will have bounced back strong in May, and I think they’ve got a good shot to beat those projections.
Also their target demographic is women 35-55 in homes with household income of $140K+. Just the type of people who worked from home for a few months, may still be, and did a lot of thinking about upgrading their furniture with the money they weren’t spending on fancy dinners out and events and such.
But even if I’m totally wrong about all of that, their net-net is 24% higher than the stock was trading at the end of the day!
My plan is to sell if it gets back above liquidation value before the stock market crashes again from hospital overrun. If it drops back below liquidation value, I’ll buy it again before the earnings report. If it stays low, I’ll hold onto it long-term, it’s still good value at this price.
Need to split off a STONKS thread imo