"so it turns out when selling covered calls and if you buy the shares the stock isn't subtracted from the buying power. The cash balance from the covered call gets added to your cash – increasing your buying power by the premium you took in." A nice analogy: " Imagine you get a loan. There’s a cap on loaning 2x your cash. You use that to buy a shitty car. You then go to a dealer and sell the car, but he’s not actually picking it up until the weekend. He gives you the cash now after the paperwork is signed. You take that cash back to the bank, double it with another loan, and buy a 2x nicer car. Rinse and repeat until you’re selling lambos. The crazy part by the way, and robinhood’s fuckup, is that they are both the car dealer and the bank. They are letting him sell covered calls (a delayed sale of the car) on their own fucking platform and then giving him a loan against the proceeds of the sale. It’s like giving him a loan on a loan, which they absolutely cannot legally do. Now, at any point the covered calls could be exercised — the dealer could come pick up the car early since it’s contractually his. Usually he won’t because the Black-Scholes model of pricing used cars says not to, but he can. And if he does you’re fucked (I think) because the bank will take a look at your new balance sheet and realize you owe them a car’s worth of money."
Nope, it's been there for a while now. Someone spectacularly leveraged $2K(?) to $50K and lost $75K. They'll fix it once it makes the news.
Why would anyone want to maintain an account with Robinhood after all the majors have cut commission to zero? Anyone?
Obviously to bankrupt it. There is no reason why a competitor couldn't do this even just for fun and giggles... I am signing up for the 250 times leverage for sure...
Posted 5 days ago by another redditor: "With Robinhood Gold, you can use what's called Margin to trade with increased Buying Power. So I did an instant deposit of 2000 dollars (the minimum required to access Gold Trading), and then I bought 100 shares of AMD for 3,800 or so, with margin. Then I sold an AMD Call Contract with a 2 dollar price strike to get almost all my money back (it's important to find a stock that has Call Options with such low strike prices like Ford, GE, etc). Then I use that money to buy TWO hundred shares of AMD because remember, margin doubles my buying power, then I sell 2 Call Contracts witht he same 2 dollar strike price to get almost all my money back, which is then doubled again thanks to Robinhood's Margin. I repeat this until I am sufficiently leveraged for my Personal Risk Tolerance. Right now, I am at 25x leverage because I had 2000 dollars in Instant Deposits. I then use my increased buying power to maximize my gains."
If you lose their money won't that affect your ability to open an account with another firm? Won't your trading career effectively be over? If you are skilled enough to find profitable trading opportunities you probably don't need to find margin loopholes to benefit from them. You most likely have enough access to capital to benefit from them.
What is your purpose in publicizing the loophole? I have found a loophole on a certain platform. I am going to exploit it to the limit before they eliminate it.