Robinhood replaced “call” and “put” with “up” and “down”
twitter.com
twitter.com
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.
In-the-money options are automatically exercised by OCC at maturity, unless the holder contacts them and tells them to do otherwise. American listed single-stock options are physically settled, meaning that you either exercise them for stock, or you don't exercise them at all.
If you're short in-the-money options, you generally assume they will be exercised.
Also, if you have a deep in-the-money call option on a stock that pays a dividend, you may need to exercise it to capture the dividend. You will lose money if you fail to exercise.
Option exercises are sometimes contrarily decided (that is, not exercised when they are in the money) if the holder of a very large option position has a hedge that cancels out his stock delivery. In practice, this is infrequent, and you usually only do it when the market impact of trading out of your residual shares will lose more money than the intrinsic value you forgo by failing to exercise your options.
Robinhood will liquidate options prior to maturity if the holding account cannot afford to exercise them, but (A) this is done at a loss and (B) this will not happen if the account has enough capital to perform the option exercise.
"Up options" and "down options" are not a clarification nor a level of abstraction. Rather, they are a misnomer that suggests a false level of simplicity.
In an ideal world, people using Robin Hood would "win" like 49% of the time. Enough to keep them coming back like the casino, but let's not be unrealistic and expect some guys clicking around to out trade wall-street.
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.
Elsewhere[1] it is stated "Prior to buying or selling an option, investors must read a copy" (emphasis mine).
Of course, after reading it you should be sure you understand it, but that's probably hopeless...
[1]https://www.theocc.com/about/publications/character-risks.js...
I was referring specifically to call options; I guess that wasn't clear. You're right, there are occasionally circumstances under which a person might want to exercise a call option ahead-of-time, but as a general rule, it's sub-optimal.
ie. If you do not know how pointers work you have no busines programming because you'll undoubtedly screw your app.
I also disagree with the core thrust of your post, but that's subjective so I'm listing this second. As someone who went from "financially clueless" to trading options over the last few years, I got to see my own mistakes firsthand, which were at least initially rooted in not understanding the implications of various vehicles and the patterns by which to use them, and that was even after quite a bit of time practicing in simulators.
No, I absolutely agree with the parent that there's a risk to not only trying to spoon-feed gambling (which is honestly how I see options, take it or leave it) under the guise of investing to uninformed consumers, but in splitting the jargon so a new entrant can't even easily bootstrap their knowledge by looking up the terms.
(I find it additionally funny to be arguing this, as I'm normally a staunch opponent to the Accredited Investor laws, but there's definitely a continuum between "keep poor people from using these vehicles" and "everyone and their grandmother can now shoot themselves in the foot without the most base validation that they know what they're getting into or have the tools to do so with eyes open")
This is where the pointer analogy works. You don't need to use, but by knowing what a f pointer is, you increase your knowledge about the domain as you've put, by knowing the difference of "pass by reference vs value".
And messing up an app does not put "owns" finances at risks. But may put others by tons of different ways of bad written software (if released or used anyway). So you have more responsibility with software because it MAY affect others and not just yourself blowing your own money.
So basically: At least they will not be programming insecure things, even websites that leak millions of records every week by "thinking they know programming".
Too much double standard: "Lets make programming accessible so everyone can become code monkeys without clue, but do not touch my precious stock trading terms. We do not want anyone trying to get rich without a clue."
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.
Simplification[1] is in the eye of the beholder.
However, your comment is definitely more evidence that you can't make options self-explanatory by renaming them.
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.
At this point, customer service of the major discount broker I've used for many years is so abysmal that the last thing I want is a free alternative that promises to do more for me. It makes me think of how impossible it is to deal with Google when something goes wrong with their free offerings.
I think social media has become a societal problem because there is so much revenue available from exploiting addictive behavior, and the logic has to lead to brokers trying to catch up. If you are sensible with investing, the system doesn't need or want you.
Edit: Turns out I did sort of misunderstand. The question has been answered.
https://twitter.com/internetofshit or the defunct Read the Fucking HIG
I guess it's better than trading slaves.