can someone create 2^N LLCs and keep doing the opposite trade in each ... keep the winner and let others go bankrupt
He was leveraged. The idiots at RH allowed the credit balance from the bull put vert to be utilized. Essentially negative haircut for ITM credits. The family should sue these idiots into ch7. The kid knew what the correct req was and yet still leveraged up. Sorry, I have no tears.
He wasn't naked short. They allowed essentially unlimited leverage due to poor coding. He was short an ITM put spread.
I may be wrong. However, the way the article reads it sounds as though Robinhood debited his account the cash required for the purchase of 300 shares of AMZN but did not credit the shares to his account, making him think he went nearly 3/4 MM into debit. It does not appear as though he had also traded the credit balance, which would have been a very small amount of money anyway (a one strike wide AMZN put spread *3 = small credit balance). If he were short three put credit spreads 1 strike wide on AMZN his max exposure was very small. He did not understand what he was seeing, panicked, and killed himself. Reading the article closely indicates to me that the problem was not leverage. His suicide note said that he thought his risk was limited and that the lower strike put would protect against such a loss as RH was reporting in his account. Also, his account showed $16K in equity, so the kid's mistake was not the trade. The mistake was he killed himself over a misread of a terrible front end trading app.
I should have read the article, but FWIW: I posted my previous to twitter when the initial cases hit the wires. A law firm contacted me asking if I would look at the runs of one of their clients as it appeared to be the case. I got the runs predicate on acting as an expert witness and the scenario played out as I earlier stated.
I figured this would've been something he'd have seen happen in similar trades? Who knows, maybe dude went full r-tard on this 1st attempt; he's 20 after all.