The guy above exploited a bug allowing him to buy $50,000 worth of options with only $2,000 of actual cash. In true WSB fashion, his genius exploitation was followed by a retarded investment, putting him five figures in debt.
Ironyman's situation is more complicated. You should just look it up.
I thought about explaining it to you in depth, but instead I'll leave it at this. Most WSB drama revolves around trading programs not understanding when certain trades could potentially put the account holder on the hook for way more money than they have in their account. Usually this happens when a trade/option involves borrowing shares from another person.
Ironyman didn't understand that if someone asked for their shares back before a certain date his whole position would shatter, someone did, and the broker (Robinhood) had to spend money out of their own pocket to fix the situation. Robinhood updated their trading program to block the kind of trade he was making after the incident so no other idiots could try it.
The real explanation is more complex, but it essentially comes down to idiots discovering something more dangerous than casino gambling.
Ah, so its basically these trading apps not seeing the faults in their own software and some dude finding it first and exploiting it, all to the benefit of drama. Cool, ty.
Well its part not being able to see how certain complex chains of trades can create a problem not visible if you look at any one trade in isolation.
Really the part that the brokerage cares about is being able to accurately estimate liquidity (e.g. how much cash does someone actually have). In this case, the guy was able to get the app to consider money that was generated by the start of a certain kind of trade as liquid assets allowing him to do more trades, when really that money is "spoken for" pending the outcome which could be days or even months from now.
Well, this what happens when mostly junior developers try to “disrupt the market” by pushing beta features to prod without sufficient testing (or letting users with real money do the testing)
I don't trade but I go on that sub a lot because they're in similar spirits to r/drama and half of them have some form of a mental illness (like us!!)
Basically, he abuses an overlook on Robinhood's part. I'll simplify it, someone can tell me if I'm wrong:
That's not his money. That is money that Robinhood (RH) lent him, on the assumption that he'll go positive on the money, pay RH the principal back, keep profits, and both parties are happy. Of course, this doesn't always happen and you end up having to pay RH back sometimes, which is what makes it lucrative to RH.
Typically, you're only allowed to borrow your amount in capital, which would double your "play money" so to speak. Basically, RH didn't look at his assets as well, which allowed him to keep on doubling his borrowed money until he had $50,000. This is outrageously embarrassing for RH. It is literally basic economics and trading, and they fucked it up.
Anyways, he is an incel (not only that, but a total retard) so he YOLOd all $50,000 on Apple puts, because they hire women.
Basically, puts are when you're betting on the company doing poorly. Calls are when you're betting on the company doing well.
But our mentally deficient friend here forgot that Apple released their earnings report, and that it was good. Apple went up, so his puts lost basically all of their value. So he lost all of that money.
Edit: And remember too, he didn't just lose the money, he lost Robinhood's money. He, himself, is 50,000 dollars in the negative. Luckily for him, RH is probably just gonna sweep it under the rug because of how embarrassed they are that this happened in the first place.
Because options by design track movement of a stock in rather general terms. There's a bit of "the Greeks" at work like time decay and volatility that throw monkey wrenches into options pricing in a way that the underlying (aka the actual stock) barely feels. So a monetary drop off in stock price could swing value of the options wildly, like if there's a sell off on good news.
What options traders can do is set instructions to take advantage of those swings to sell the option at a certain price if they aren't greedy or super intense on following the prices and can react like a cat. This dude was asking about how options worked before he found out how piss poor RH's margin systems were. Didn't even know he could set limits.
Ok, this makes sense. There is a flurry of financial activity that, if observed at any given moment, might present a contradictory picture due to the collective and asynchronous nature of these aggregate transactions.
Green good red bad is all anybody needs to know to start trading and if you can install the app, you are a stocks trader. Its as simple as that. Thats how we end up with fuck ups like this guy.
Based retard who skips paragraphs and accidentally posts on his porn alt. I do the same thing.
When you buy put options on a company (puts) you are betting on them doing poorly. If they DO do that and the stock falls below your chosen price, your put becomes valuable. If they do well and the stock stays above your chosen price, your put becomes basically worthless.
So, he, in his infinite wisdom, placed 50,000 dollars worth of puts on Apple right before they released their earnings report. Probably because they hire women and he thought they would do bad. So he GUH'd all that money down the drain.
Its not that I don't skip paragraphs, its that I have literally no idea what wallstreet bets are. I had heard of them but I didn't knew what they were.
So they're like stocks but you make money if the company does badly instead of well?
If you're good at guessing/predicting whether or not companies will do good or bad each quarter, why not buy stocks instead?
Because options are like lottery tickets, where you get what you get when it's said and done. They're relatively cheap but you make massive profit if you get it right. Imagine buying a 50,000 dollar lottery ticket where you have a 30% chance of winning. That's basically what he did
Edit: also, WSB is NOT good at judging whether or not companies will do good. That's why it's called Wall Street BETS. It's uneducated gambling, but sometimes someone posts a (usually wrong) DD (an assessment of current companies and predictions of their future stock prices, holistically)
If you're good at guessing/predicting whether or not companies will do good or bad each quarter, why not buy stocks instead?
Greed, and a misplaced belief that you understand the market well enough to beat it, then misplaced confidence when you make the correct call by random chance. Bagholders mad they don't have the cash to make proper investments so they stick to gambling.
He exploited the fact that Robinhood app has no "memory" for loans. I'll give you an example.
I have one pound of apples. I can sell them for $3.
I go to you and ask for a loan and you will only loan me $3 since that's how much worth of apples I have to cover the loan in case I need to pay you back.
I buy another pound of apples with the loan and ask you for another loan. This time you will give me $6 because I have $6 worth of apples.
I buy another 2 lbs of apples with the loan and ask you for another loan. This time you will give me $12 because I have $12 worth of apples.
I keep doing this until I have $50000 of apples and owe you $50000-$3. Now I can just sell all my apples and have $50000 loan from you even though the only collateral I actually have is $3 of apples.
The autist used stock as the collateral (the apples) and then sold it to buy puts on Apple stock.
A put option is valuable if the price of the stock is below the strike price of the put. Basically he bet $50000 that Apple stock would be under a certain price.
Puts are very risky because if the stock is above the strike price, they are worthless. He thought that Apple would have a bad quarter and that after the earnings report it would go down in price. Actually apple had a good earnings report and the stock went up slightly, certainly not enough that his puts were worth anything.
Now his puts are worthless and he owes Robinhood $50000.
I hope your name is sarcastic. I shudder at the thought of a brony somehow being responsible for someone's finances. I bet the IRS hates your filings.
"What the fuck, glitter? Oh god, why is this form so sticky? Wait, that stain has a label; 'candy flavored horse semen'. Ok this thing is going in the fire"
hey! thanks for that explanation! I like lurking that sub but don't know half of what is going on. It's on my list of things to do to at least read something that explains trading, but everything on the web is affiliate trash. I'll probably have to buy a book idk.
I was curious as well so I found a comment chain explaining it. He basically manipulated the robinhood app to allow him to get a shitload of money I guess?? and then he bet it all on one thing which then failed.
Okay super simple explanation (if I'm understanding this correctly): he bought options with his original $2k and then sold them to break even. A glitch in Robinhood let him use those sold shares for collateral, as if he hadn't sold them. So he used the leverage to buy double the first amount. He kept doing this until he was leveraged x25, then he used that leverage to make a giant bet that apple would do poorly.
Apple did not do poorly.
So now he owes that x25 leverage back. I believe he also owes for the AMD shares as well. So like $90k total.
With his original 2k he “wrote” put options on AMD instead of buying them. The difference is like this:
BUYER
Pays $60 premium for the right, but not the obligation, to purchase 100 shares on X date at Y price.
WRITER
Receives the $60 premium from the buyer upfront. At option expiration if the option is “in the money” (meaning it’s at or beyond the desired price) it might get exercised meaning the writer is obliged to sell the shares to the buyer at the agreed upon price.
So what this autist did was “write” a bunch of options, collected the premium, used this 10x leverage that Robinhood gives you to write even more options, collected that premium, wrote a bunch more options... and then he bought the puts on Apple.
you can see how irresponsible it is of Robinhood to give someone this autistic access to $50k of leveraged money very quickly lol.
You go to a bank with $2000 dollars of your own and ask for a loan in cash. They give $2000 dollars to you .
​
Next day you go back to the bank for another loan for $4000 dollars .Normally a competent bank would deny that because half of that $4000 is theirs ;but we are talking about Lehman Brothers here. So banks gives you $4000 dollars in loan and now you have $8000 dollars with$6000 of it from bank.
​
You keep doing it until you have $50000 dollars to spend but in reality you actually only have $2000 dollars while the rest of it is from the bank. You go into the casino and bet everything on black. Logically you lose everything but in reality you only lost $2000 dollars while the rest is from the bank.
​
In this case robin hood is not allowed to give him so much leverage but their risk management team is from Somalia or some other shithole and just approves everybody.
Okay, so first of all, you've just made a reply to me that is in two unrelated parts. The first is unrelated to anything I said. As long as you comport yourself in this manner, you will only be met with derision. It is a nonsense method of communication.
66 comments
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3 FearOfBees 2019-11-02
I wish i understood stocks but the language of seething is universal.
Never forget the legend of ironyman
3 Pinksister 2019-11-02
I have no idea what that video is about but I desperately want to. Can someone explain what happened to ironyman in retard speak for me?
1 rokkerboyy 2019-11-02
Dude thought he found a way to make easy money, Robinhood said he didnt.
1 [deleted] 2019-11-02
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1 [deleted] 2019-11-02
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1 TheLordHighExecu 2019-11-02
The guy above exploited a bug allowing him to buy $50,000 worth of options with only $2,000 of actual cash. In true WSB fashion, his genius exploitation was followed by a retarded investment, putting him five figures in debt.
Ironyman's situation is more complicated. You should just look it up.
1 wm20123 2019-11-02
I thought about explaining it to you in depth, but instead I'll leave it at this. Most WSB drama revolves around trading programs not understanding when certain trades could potentially put the account holder on the hook for way more money than they have in their account. Usually this happens when a trade/option involves borrowing shares from another person.
Ironyman didn't understand that if someone asked for their shares back before a certain date his whole position would shatter, someone did, and the broker (Robinhood) had to spend money out of their own pocket to fix the situation. Robinhood updated their trading program to block the kind of trade he was making after the incident so no other idiots could try it.
The real explanation is more complex, but it essentially comes down to idiots discovering something more dangerous than casino gambling.
1 Pinksister 2019-11-02
Ah, so its basically these trading apps not seeing the faults in their own software and some dude finding it first and exploiting it, all to the benefit of drama. Cool, ty.
1 wm20123 2019-11-02
Well its part not being able to see how certain complex chains of trades can create a problem not visible if you look at any one trade in isolation.
Really the part that the brokerage cares about is being able to accurately estimate liquidity (e.g. how much cash does someone actually have). In this case, the guy was able to get the app to consider money that was generated by the start of a certain kind of trade as liquid assets allowing him to do more trades, when really that money is "spoken for" pending the outcome which could be days or even months from now.
1 BuyBooksNotBeer 2019-11-02
Well, this what happens when mostly junior developers try to “disrupt the market” by pushing beta features to prod without sufficient testing (or letting users with real money do the testing)
1 [deleted] 2019-11-02
[removed]
3 Chapose 2019-11-02
Can someone explain what exactly hapoened? I get that he lost 50k but why?
8 RBLXTalk 2019-11-02
I don't trade but I go on that sub a lot because they're in similar spirits to r/drama and half of them have some form of a mental illness (like us!!)
Basically, he abuses an overlook on Robinhood's part. I'll simplify it, someone can tell me if I'm wrong:
That's not his money. That is money that Robinhood (RH) lent him, on the assumption that he'll go positive on the money, pay RH the principal back, keep profits, and both parties are happy. Of course, this doesn't always happen and you end up having to pay RH back sometimes, which is what makes it lucrative to RH.
Typically, you're only allowed to borrow your amount in capital, which would double your "play money" so to speak. Basically, RH didn't look at his assets as well, which allowed him to keep on doubling his borrowed money until he had $50,000. This is outrageously embarrassing for RH. It is literally basic economics and trading, and they fucked it up.
Anyways, he is an incel (not only that, but a total retard) so he YOLOd all $50,000 on Apple puts, because they hire women.
Basically, puts are when you're betting on the company doing poorly. Calls are when you're betting on the company doing well.
But our mentally deficient friend here forgot that Apple released their earnings report, and that it was good. Apple went up, so his puts lost basically all of their value. So he lost all of that money.
Edit: And remember too, he didn't just lose the money, he lost Robinhood's money. He, himself, is 50,000 dollars in the negative. Luckily for him, RH is probably just gonna sweep it under the rug because of how embarrassed they are that this happened in the first place.
6 Whaddaulookinat 2019-11-02
Worst (best) part was he was actually up about 20k if he closed at the high of the put value. But, like a dumbass, he wanted more than 1000% gain.
Edit: "guh"
6 UpvoteIfYouDare 2019-11-02
How did he manage to get up $20k with puts against a company that just released a good earnings report?
3 Whaddaulookinat 2019-11-02
Because options by design track movement of a stock in rather general terms. There's a bit of "the Greeks" at work like time decay and volatility that throw monkey wrenches into options pricing in a way that the underlying (aka the actual stock) barely feels. So a monetary drop off in stock price could swing value of the options wildly, like if there's a sell off on good news.
What options traders can do is set instructions to take advantage of those swings to sell the option at a certain price if they aren't greedy or super intense on following the prices and can react like a cat. This dude was asking about how options worked before he found out how piss poor RH's margin systems were. Didn't even know he could set limits.
3 UpvoteIfYouDare 2019-11-02
Ok, this makes sense. There is a flurry of financial activity that, if observed at any given moment, might present a contradictory picture due to the collective and asynchronous nature of these aggregate transactions.
2 Whaddaulookinat 2019-11-02
Exactly. That's why they are called derivatives. Small change changes in stockprice gives option wild changes
1 [deleted] 2019-11-02
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1 [deleted] 2019-11-02
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6 NMJ87 2019-11-02
Lol doing puts on Apple
Oh lord, just go do penny stocks, may as well, these guys are gamblers
4 cfbWORKING 2019-11-02
It’s called Wall Street bets, of course they are gamblers
4 NMJ87 2019-11-02
Yeah but they're insane, they gamble with blue chip puts and calls for 5% returns while risking their entire portfolio.
5 Seattle_Bussy_Lmao 2019-11-02
Trump makes the stock market extremely volatile, so there’s a certain amount of sense to it.
Anyway, if Amazon moves up 5% next week I’m buying cocaine
1 [deleted] 2019-11-02
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4 Lysis10 2019-11-02
lol same. I enjoy reading their autism but don't understand half of it except for threads discussing their most notorious turboautists.
2 Chapose 2019-11-02
Lmao. I think I would like the sub too, problem is I have no idea what they are talking about 95% of the time.
14 Platycel 2019-11-02
Don't worry, neither do they.
3 Stenwalden 2019-11-02
Green good red bad is all anybody needs to know to start trading and if you can install the app, you are a stocks trader. Its as simple as that. Thats how we end up with fuck ups like this guy.
1 Pinksister 2019-11-02
Hey, I have disposable income and know jack shit about trading but I like how retarded wsb is, it makes me feel at home. Maybe I'll give it a shot.
3 NMJ87 2019-11-02
Trading ain't too difficult to understand, jump in
3 ifyouarenuareu 2019-11-02
Their language is incoherent babble and I love it
1 patelniv98 2019-11-02
Try watching Kamakazi cash he's got some videos about r/wsb
1 [deleted] 2019-11-02
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1 [deleted] 2019-11-02
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1 [deleted] 2019-11-02
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1 Adramolino 2019-11-02
I'm confused, did he place money on the company specifically BECAUSE they hire women or what?
Also, how is the earnings report good bad for him? Shouldn't it be good for him since the company he put money on is doing well?
1 RBLXTalk 2019-11-02
Based retard who skips paragraphs and accidentally posts on his porn alt. I do the same thing.
When you buy put options on a company (puts) you are betting on them doing poorly. If they DO do that and the stock falls below your chosen price, your put becomes valuable. If they do well and the stock stays above your chosen price, your put becomes basically worthless.
So, he, in his infinite wisdom, placed 50,000 dollars worth of puts on Apple right before they released their earnings report. Probably because they hire women and he thought they would do bad. So he GUH'd all that money down the drain.
1 Adramolino 2019-11-02
Its not that I don't skip paragraphs, its that I have literally no idea what wallstreet bets are. I had heard of them but I didn't knew what they were.
So they're like stocks but you make money if the company does badly instead of well?
If you're good at guessing/predicting whether or not companies will do good or bad each quarter, why not buy stocks instead?
1 RBLXTalk 2019-11-02
Because options are like lottery tickets, where you get what you get when it's said and done. They're relatively cheap but you make massive profit if you get it right. Imagine buying a 50,000 dollar lottery ticket where you have a 30% chance of winning. That's basically what he did
Edit: also, WSB is NOT good at judging whether or not companies will do good. That's why it's called Wall Street BETS. It's uneducated gambling, but sometimes someone posts a (usually wrong) DD (an assessment of current companies and predictions of their future stock prices, holistically)
1 wm20123 2019-11-02
Greed, and a misplaced belief that you understand the market well enough to beat it, then misplaced confidence when you make the correct call by random chance. Bagholders mad they don't have the cash to make proper investments so they stick to gambling.
5 BasicallyADoctor 2019-11-02
He exploited the fact that Robinhood app has no "memory" for loans. I'll give you an example.
I have one pound of apples. I can sell them for $3.
I go to you and ask for a loan and you will only loan me $3 since that's how much worth of apples I have to cover the loan in case I need to pay you back.
I buy another pound of apples with the loan and ask you for another loan. This time you will give me $6 because I have $6 worth of apples.
I buy another 2 lbs of apples with the loan and ask you for another loan. This time you will give me $12 because I have $12 worth of apples.
I keep doing this until I have $50000 of apples and owe you $50000-$3. Now I can just sell all my apples and have $50000 loan from you even though the only collateral I actually have is $3 of apples.
The autist used stock as the collateral (the apples) and then sold it to buy puts on Apple stock.
A put option is valuable if the price of the stock is below the strike price of the put. Basically he bet $50000 that Apple stock would be under a certain price.
Puts are very risky because if the stock is above the strike price, they are worthless. He thought that Apple would have a bad quarter and that after the earnings report it would go down in price. Actually apple had a good earnings report and the stock went up slightly, certainly not enough that his puts were worth anything.
Now his puts are worthless and he owes Robinhood $50000.
2 Chapose 2019-11-02
This sounds like a fun activity I should try out tbh.
7 jaredschaffer27 2019-11-02
Do it up to a million. If you lose it all, just declare BK and try again in 7 years.
2 PUBLIQclopAccountant 2019-11-02
BK5, 11, or 13?
3 jaredschaffer27 2019-11-02
BK Broiler Burger meal.
1 wm20123 2019-11-02
I hope your name is sarcastic. I shudder at the thought of a brony somehow being responsible for someone's finances. I bet the IRS hates your filings.
"What the fuck, glitter? Oh god, why is this form so sticky? Wait, that stain has a label; 'candy flavored horse semen'. Ok this thing is going in the fire"
1 remarkENable 2019-11-02
Wasnt the loan thing similar to the other famous Robin hood exploit? I thought they fixed it
3 BasicallyADoctor 2019-11-02
That was a box spread which is more complicated and different but yeah they fixed that but not this
7 Whaddaulookinat 2019-11-02
But box spreads are literally free money
3 Seattle_Bussy_Lmao 2019-11-02
Can’t go tits up
1 Lysis10 2019-11-02
hey! thanks for that explanation! I like lurking that sub but don't know half of what is going on. It's on my list of things to do to at least read something that explains trading, but everything on the web is affiliate trash. I'll probably have to buy a book idk.
3 FearOfBees 2019-11-02
https://www.reddit.com/r/wallstreetbets/comments/dpnzup/i_recorded_todays_marketopen_and_the_instant/f5x3xzp
I was curious as well so I found a comment chain explaining it. He basically manipulated the robinhood app to allow him to get a shitload of money I guess?? and then he bet it all on one thing which then failed.
1 The_Reason_Pete_Wins 2019-11-02
Okay super simple explanation (if I'm understanding this correctly): he bought options with his original $2k and then sold them to break even. A glitch in Robinhood let him use those sold shares for collateral, as if he hadn't sold them. So he used the leverage to buy double the first amount. He kept doing this until he was leveraged x25, then he used that leverage to make a giant bet that apple would do poorly.
Apple did not do poorly.
So now he owes that x25 leverage back. I believe he also owes for the AMD shares as well. So like $90k total.
Hope he has a good bankruptcy lawyer lol
2 Seattle_Bussy_Lmao 2019-11-02
With his original 2k he “wrote” put options on AMD instead of buying them. The difference is like this:
BUYER
WRITER
So what this autist did was “write” a bunch of options, collected the premium, used this 10x leverage that Robinhood gives you to write even more options, collected that premium, wrote a bunch more options... and then he bought the puts on Apple.
you can see how irresponsible it is of Robinhood to give someone this autistic access to $50k of leveraged money very quickly lol.
1 The_Reason_Pete_Wins 2019-11-02
And that's why he's still on the hook for the AMD puts, correct?
1 Seattle_Bussy_Lmao 2019-11-02
Yessir
1 FearOfBees 2019-11-02
I see...
3 patelniv98 2019-11-02
Alright so essentially he gambled. Here's how:
​
You go to a bank with $2000 dollars of your own and ask for a loan in cash. They give $2000 dollars to you .
​
Next day you go back to the bank for another loan for $4000 dollars .Normally a competent bank would deny that because half of that $4000 is theirs ;but we are talking about Lehman Brothers here. So banks gives you $4000 dollars in loan and now you have $8000 dollars with$6000 of it from bank.
​
You keep doing it until you have $50000 dollars to spend but in reality you actually only have $2000 dollars while the rest of it is from the bank. You go into the casino and bet everything on black. Logically you lose everything but in reality you only lost $2000 dollars while the rest is from the bank.
​
In this case robin hood is not allowed to give him so much leverage but their risk management team is from Somalia or some other shithole and just approves everybody.
​
​
That is the best ELI5 i can do.
3 Lysis10 2019-11-02
An ironyman contender rises from the ashes.
His other thread made me LOL https://www.reddit.com/r/wallstreetbets/comments/d63kjm/what_are_some_good_corporations_to_invest_in_that/
5 Plexipus 2019-11-02
Shouldn't have diversified his tendie portfolio
2 RBLXTalk 2019-11-02
please don't reproduce xD
1 SnapshillBot 2019-11-02
Okay, so first of all, you've just made a reply to me that is in two unrelated parts. The first is unrelated to anything I said. As long as you comport yourself in this manner, you will only be met with derision. It is a nonsense method of communication.
Snapshots:
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1 SJCards 2019-11-02
Now this is true autistic ecstasy.