Comment by shubik22 | Hacker News Reader

Comment by shubik22 | Hacker News Reader

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Last time I checked on Robinhood (and maybe they've changed it since then), when you want to buy options on their app, their UI gives you two options: "I think the stock is going to go up" and "I think the stock is going to go down."

Say what you will about "democratizing" finance, but even if you think enabling retail investors to buy options is a laudable goal, surely they should at least know what a "put" and a "call" is? (The point being options are complicated to understand, and if you don't even know their names, you probably don't understand how they work. And if you don't understand how they work, maybe you shouldn't be buying them.)

I feel like a lot of the arguments I see in favor of "democratizing finance" could be applied to a company making some incredibly harmful drug. Ok, maybe we shouldn't make it illegal for companies to produce or sell that substance, but surely we can all agree that company is actively doing harm to its customers? And we don't need to pretend that the company is "democratizing" chemical consumption.

While gamifying trading is dangerous for society, the onus for that is more on society's current obsession with memes overlapping into reality. Uneducated retail investors will lose a lot on Gamestop and Dogecoin and Shiba Inu coin, and whatever the TikTok, Reddit, etc., community hype up next, not because they haven't learned options terminology.

When I was young and started investing in individual stocks, I would've appreciated "I think the stock is going to go up/down" (as an intro as Robinhood uses it) instead of needing to google and memorize put/call. Knowing a put vs. a call added nothing useful as a retail investor. It didn't change my hypothesis about the stock or my decision to trade.

Making things easier to understand does not mean the person doesn't understand it. Just because adults struggle to understand common core math, doesn't mean kids aren't just as capable of solving an equation. Options don't need to be confusing and I actually find RH's educational material and examples pretty good to get a basic understanding of how they work.

Disclaimer: I haven't used RH.

However, if the person you're responding to is correct about their UI it's negligent. The price of an option does not vary only with whether "you think the price will go up". Essentially it's mis-representing an option as a delta trade which it isn't.

yah, the problem is in the invitation to make a serious mental model mistake on how options are valued, how they pay off, and what the hidden pitfalls are.

i’m all for democratizing access to (and the returns from) equity markets, but this isn’t about building wealth through long-term investing, or even about price discovery. it’s sharks looking to part small-time gamblers from their money.

That's fair, there could definitely be improvements in the way they explain that.

>surely they should at least know what a "put" and a "call" is?

You do learn what this is, but the "i think its going up" is just the starting UI and tbh its more approachable and faster to navigate since you don't need to memorize turns.

It’s like a casino, not because there’s something wrong with it, but because of house advantage. And there’s actually not anything wrong with that. But there’s a reason Citadel pays so much for Robinhood orderflow. And that reason is options. People lifting offers with market orders creates massive opportunities to make markets.

The average Robinhood user mostly like doesn’t understand what a put/call is, much less what Black Scholes is, or how to trade around their gamma.

But I don’t think that’s a reason to stop anything. Trading is naturally self correcting: bad traders stop. If anything it says more about reconsidering gambling laws. Let adults spend their money how they see fit if it’s not infringing on someone else’s rights.

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