Options are really the problem in that you can wipe out your equity pretty quickly. But I thought there are already roadblocks up to being cleared to trade anything other than covered calls?
Options are not a problem .... the trader is the problem. No roadblocks. When you open up a margin account the basic know-your-client questions are: Income Net Worth Type of option trades you would like to do. How long have you traded for. The answers are not verified.
It doesn't make sense. What the article says is he only had $16,000 in his account? Robinhood would not have allowed him to trade naked calls which is the most riskiest. Said he sold puts so, even then, they would have capped the puts he could have sold to his capital. No broker would be dumb to give him margin when he only had $16,000? Only thing that would make sense is he had say $100,000 or more enabling him to sell more put options. Still, hard to see how he could have lost $700,000?
Read the details guys. He was trading option spreads, that negative balance wasn't even real. Just a transient display item that would have been offset when they closed his other leg. He probably had a small loss, if any at all. Just a tragic case all around, wow.
And somehow RH will be blamed for it. Risk disclaimers will no longer be enough to protect firms. Even as a loser, you must win.