20-Year-Old Robinhood Customer Dies by Suicide After a $730k Negative Balance
34 points by shawnMer 5 years ago | 23 comments- wmeredith 5 years ago“In fact, a screenshot from Kearns’ mobile phone reveals that while his account had a negative $730,165 cash balance displayed in red, it may not have represented uncollateralized indebtedness at all, but rather his temporary balance until the stocks underlying his assigned options actually settled into his account.”
How the hell is this a thing? Who approved this UI?
- Someone1234 5 years agoIt isn't a "UI" decision, that's an accurate reflection of the value of the account at that point in time. How would you reflect a future date's strike price without knowing what that could be? You cannot.
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.
- kls 5 years agoIt's not that hard of a market but it is a market with a higher risk tolerance than the average investor should tolerate. Most people that trade in the market know you are negative till the other trade settles. You are right it is not a UI issue, the UI reflected the current state of his trades.
- kls 5 years ago
- Someone1234 5 years ago
- magicalhippo 5 years agoHere in Norway, had the loss actually been real, he could have declared personal bankruptcy and moved on with his life. From what I can see the US has something similar, though I'm not sure how effective it is?
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.
- P_I_Staker 5 years agoIn the US, it got watered down in the Bush administration. It's quite complicated, but if you make too much income, you're disqualified. A ton of people no longer qualify. Of course, I'm not a lawyer, and I don't know how it works in the real world.
- blaser-waffle 5 years agoA 20 year old kid with no day job would probably qualify. He might not be able to get out of some student loans, but he's 20 and those aren't 700k.
- blaser-waffle 5 years ago
- sjg007 5 years agoYes, bankruptcy is an option but it's not the end of the world. Maybe forming an LLC is the way to go in these cases where you are trading non-insignificant amounts of money.
- andreicek 5 years agoExcuse my ignorance but how does personal bankruptcy work? Does this allow you to accumulate debt and move along?
- magicalhippo 5 years agoAn overview of the process here in Norway can be found here[1]. Basically the rights to all your possessions go to the trustee or court in charge of the case, which will then try to liquidate assets and pay back the creditors.
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.
- e_carra 5 years agoWikipedia has a page about it[0], but it doesn't explain in detail how it works in the U.S., it does say that it involves a process similar to corporate bankruptcy.
- gowld 5 years agoYes. Slavery is illegal. The reason interest rates are sometimes so high is that lending money is a risk for the lender, not a life sentence for the borrower.
- magicalhippo 5 years ago
- P_I_Staker 5 years ago
- rjkennedy98 5 years agoExcept for possibly commodities what is the purpose of these options. So far as I can tell it’s just gambling. Guessing whether a stock price will be slightly higher in a few weeks isn’t investing. These people aren’t doing due diligence and reading through prospectuses and understanding the proper value of the companies. They are just reading r/wallstreetbets and literally gambling on popular stocks. How does this do anybody any good? It just produces a few people who get massively lucky and a lot of people who lose everything. Neither one deserves their outcome and we are all worse off for it.
- ericmay 5 years agoThink about it like this:
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.
- kls 5 years agoTLDR; they are investment insurance, and they serve a purpose but like every market they attract speculators.
- kls 5 years ago
- rahilb 5 years agoSophisticated investors can use options to construct payout graphs that are not linear, e.g. you can form an M shaped payout with knock out puts & calls. They’re actually used to manage risk, not gamble. Most option activity is large investors limiting exposure, or big banks creating or hedging structured products (which are generally not available to non institutional investors).
- gerty 5 years agoOptions can probably first be seen as a form of insurance - you pay a small price to protect yourself against upward/downward movements. It's of course taken to the next level by r/WSB as a tool for leveraged gambling.
- ericmay 5 years ago
- battery423 5 years agoIts really unfortunate that we have a mental model as default which makes suicide the first choice.
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.
- gowld 5 years agoThis seems to clearly be a case of a person who succumbed to pre-existing mental health troubles, not someone driven to desperation by (the appearance of) financial troubles.
That said, Robinhood is evil.
> shower of colorful confetti Robinhood routinely deploys after customers make trades.
- chirau 5 years agoWhy do you say Robinhood is evil? It's a platform. It does not make decisions for you. Heck,it does not even give you recommendations. Even the greatest tools in the wrong hands can lead to harm but can you blame the tool? You don't blame the knife when you cut yourself.
- aka1234 5 years agoIt intentionally gamifies financial transactions (see the OP's comment about the colorful confetti that displays when user make trades). The app is designed to provide a dopamine hit when making trades, the only purpose of which is to compel the user to make additional 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!
- aka1234 5 years ago
- chirau 5 years ago
- bradstewart 5 years agoI've never used Robinhood--does it allow option trading by default?
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.
- thatguy0900 5 years agoYou basically just tick a checkbox when making an account, it has a few splash screens of warning but that's it.
- thatguy0900 5 years ago
- detaro 5 years agodupe: https://news.ycombinator.com/item?id=23553794 and others linked there