You're right, but due to Robinhood's terrible UI/UX, when you hold a spread and the short leg gets assigned, it shows your account as owing an astronomical amount. In reality, you have an opposite leg that gets exercised and you're only out the difference in the spread (which that risk is based on your account balance/margin/etc).

This kid didn't lose $700k, his account just shows -$700k until Monday morning when it will update with the other leg being exercised and he probably lost a few grand instead. Here's a similar situation where someone thought they lost $172k, when in reality they lost $2k. [1]. It's a combination of a shitty UI and people not understanding option spreads.

[1] https://old.reddit.com/r/wallstreetbets/comments/aohvow/hi_t...