Until everything settles, the value of the account appears negative – and in this case, very negative. In Kearns’ case, what may have happened is this: the contract to purchase shares was called one day, and the option to sell shares was executed the next day. This isn’t considered a particularly high-risk strategy, because the most a trader can lose per share is the difference between the two strike prices. If the stock price stays above the higher strike price through the expiration of the contract, there is a net credit that the trader keeps. Both contracts have the same expiration date. Traders using the bull put spread method sell put options at a higher strike price and buy puts at a lower strike price. Those who sell puts are obligated to buy the underlying securities at the strike price if the options contract owner chooses to exercise their rights. The contract has an expiration date, and contract owners can exercise their right to sell anytime before the expiration date. The strike price is valid, regardless of whether the underlying securities increase or decrease in price. Put options give the contract owner the right – but not the obligation – to sell the underlying securities at a predetermined level referred to as the “strike price”. While Robinhood hasn’t released the details of Kearns’ trades, many have speculated that he was experimenting with a somewhat sophisticated options strategy known as a “ bull put spread”. It seems that the amount was probably off due to the time it takes for underlying stocks to settle. Based on the experiences reported by a number of users it seems that the large negative balance showing in Kearns’ account was likely only temporary – not a balance owed. Kearns’ death is a tragedy in so many ways, but nothing is more discouraging than this: Kearns didn’t owe $730,165. If you check the app, the margin investing option isn’t even ‘turned on’ for me. There was no intention to be assigned this much and take this much risk, and I only thought that I was risking the money that I actually owned. “How was a 20 year old with no income able to get assigned almost a million dollar’s worth of leverage? The puts I bought/sold should have canceled out, too, but I also have no clue what I was doing now in hindsight. According to a family member, a note written by Kearns just before his death said, in part: Noting that he had neither requested nor authorized margin trading, Kearns was stunned to discover that such a loss was possible. It seems Kearns believed he had incurred sudden, massive financial losses. He took a screenshot, which was later recovered by his family that reflected a cash balance of ($730,165). It appears that the despair which ultimately led to Kearns’ death was triggered by what he saw in his Robinhood account.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |