20-Year-Old Robinhood Customer Dies by Suicide After a $730k Negative Balance
forbes.com
forbes.com
How the hell is this a thing? Who approved this UI?
The problem isn't the "UI" the problem is that people are options trading who have no business doing so. It is actually incredibly complicated, and some gambits people are making even more so.
I've read up on options, but I don't do so because I know enough to know I'd need to full time study it for up to a year and then dry-trade to test my assumptions.
Tragic event regardless, and a stark reminder to us programmers that we should always keep in mind what exactly we're doing, what are we telling the users, what are we letting the users do.
However a big difference to a corporate bankruptcy is that if you're unable to provide for yourself, you can apply to the trustee/court to get some money for essentials from your previous assets. You can also claim that certain assets are "essential", so you can keep them. This could be clothes, furniture etc. You also get to keep tools, means of transportation etc that you require for your work or similar. Your home is also protected to some degree.
Once the case is settled you pretty much continue your life. You can't start a company for some time, but AFAIK nothing huge hanging over you.
Imagine you're the finance manager for an endowment of a university. You may have a fiduciary duty to grow the endowment by x%/year or not really lose all the money you have. Maybe if your endowment drops by 10% that means you can't fund the physics research department.
Now, what can you do about it? You want to protect the investment, but you can't predict the future. So instead you pay people for the option to buy shares of stock at a certain price or sell shares at a certain price. You know that if your investments drop some % it means you can't fund the physics department, so you pay a small amount of money to insure that if something crazy happens, like a pandemic, that you don't lose 10% or more of your endowment.
I know that's not the best explanation, but hopefully you get the gist of it. People who do options trading are trading with a leveraged exposure to the price of a stock. They potentially can be left with $0 because the options become worthless, so they're taking the risk of that happening with the hope that the stock price moves in a certain direction, so that the people who need to protect their money will pay them in order to protect against stock price movements.
Hopefully someone else can chime in here too with something more concise.
W.R.T this scenario with Robinhood - this will sound callous but it's a non-story. There's no HUGE problem that needs to be solved here besides Robinhood (and other applications) being more strict about letting people trade options. People take risks, they live life. Sometimes they make mistakes and commit suicide. It's incredibly tragic, it really is, but millions of people trade options and it is a functional aspect of capital markets.
Living should be better/easier then not living.
I do wanna make clear, that suicide well thought of and for a clear reason, is still a valid thing and everyone of us should have control over their own lifes.
That said, Robinhood is evil.
> shower of colorful confetti Robinhood routinely deploys after customers make trades.
Robinhood intentionally attempts to make financial transactions fun and desirable to the user. This is to drive more trade volume on their platform. The app is leveraging psychology to make users more active on the platform, which may not necessarily be in the user's longterm financial interest. If your financial app uses the same gamification tricks as a slot machine, that's a problem.
This person was 20 years old -- their brain isn't even fully developed yet. No responsible company would allow a 20-year-olds to dig themselves into a $700,000+ hole. That's a lifetime of debt for all but the highest income earners. Even banks, for all their issues, wouldn't allow that.
Yes, the person was legally an adult and make their own decisions. But no responsible company would facilitate a chain of decisions that would lead to $700,000 in debt. If only for self preservation, because the dead can't pay off that debt to the company.
But hey, Robinhood is playing with fake VC money so whatever... right? What's a couple of bodies when Robinhood is a disruptor and makes complex financial transactions fuuuuuuuuuun. Party on!
I had to fill out all sorts of paperwork informing my brokerage that I was aware of the risks, etc before ANY option trading was available. And they still only provided a small margin line at first, with a note saying they would increase it after I traded more options and they were sure I knew what I was doing.