Gents named “MoonYachts” have been gaming the Robinhood platform, accessing limitless buying power by buying stock, writing ITM calls, doing it again, and then accessing the leverage Robinhood grants them. One bloke took a $4k account and leveraged it to over $1m. The losses on these trades are staggering and Robinhood will now be chasing absolute morons for monies that cannot be recovered. They eat the bag.
With Bloomberg, Zerohedge, and others covering this scheme now, pray tell me — how does the CEO of Robinhood explain this during his next cap raise?
Many, many, many of my readers have emailed and tweeted about a Robinhood exploit that goes by the charming and accurate name “infinite leverage.” Here’s a Reddit user called ControlTheNarrative who claims to have gotten 25x leverage on his trading; that is, he put in $2,000 and turned it into about $50,000 worth of stock. Here’s another Reddit user called MoonYachts who claims to have gotten 250x leverage, putting in $4,000 and turning it into a $1,000,000 stock position. You are not supposed to be able to do this; normal stock market games do not allow you to bet a million dollars by putting up only $4,000 of your own. (“We’re aware of the isolated situations and communicating directly with customers,” said a Robinhood spokesperson.)
These people are posting screenshots and videos of their exploits. They are discussing ways to use the exploit for further, even more outrageous pranks. I do not exactly know what they are thinking. Presumably some part of what they are thinking is along the lines of “if I use $4,000 to buy a million dollars’ worth of stock and it goes up then I will make a lot of money.” But surely another big part of what they are thinking is “if I use $4,000 to buy a million dollars’ worth of stock then my friends on Reddit will be amused.” Judging by the Reddit threads, and by my email inbox, this was a correct analysis. I suppose it is not a conventional financial analysis, but you should not underestimate the importance, in trading generally, of impressing people with your wit and boldness. For what do we live, but to make sport for r/wallstreetbets, and laugh at it in our turn?
Are the lads on WallsteetBets, a retarded sub-reddit littering the internet with inane gambling tactics, contrite over this event?
Not even close. In fact, they’re scheming how to do it again and celebrating the attention.
I suppose one could argue — Robinhood gets what they deserve, in this case a bunch of broke ass destitute millennial bitches, drowning in student debt, attempting to get rich quick like their favorite rappers, by exploiting bad code by a sub-par broker dealer — ironically coined after the legendary thief of the rich.
The simulation does have a sense of humor.
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How would Robinhood even go after these broke fools?
The unwashed transients who use Robinhood leveraged to their eyeballs. It is quite humorous.
There are other platforms that offer 25 or 50-1 leverage. Most are not operating in the US now.
Most of it is within the currency space, maybe some precious metals trading.