Skip to content

Don’t invest in things you don’t understand

I opened a Robinhood account a couple of years ago but never did much trading on the platform, so my familiarity with their service was limited to a little poking around. I’m not a fan of day-trading stock (I’m bad at it) so free trades weren’t much of an incentive for me.

What I didn’t know was how easy Robinhood made it to sudden drop into options trading. Options trading can get really risky because it’s leveraged – each options contract is the right (or obligation) to buy or sell 100 shares of the underlying stock. There are situations where your potential loss is theoretically, though unlikely, infinite.

That’s what happened to Alex Kearns, a 20-year old, who took his own life after, on paper, it seemed he lost $730,000. What makes it even more tragic is that he most likely didn’t actually lose that much. The trade he was doing had two somewhat offsetting parts and only one of them was reflected in his balance – but either way, it’s a really sad story.

The lesson here is that you need to understand your investments.

Robinhood increases guardrails on options trading in the wake of a customer suicide [CNBC] – “Robinhood is making multiple changes to its platform, including making it more difficult to access to its options offering, in the wake of a customer’s death last week.”

Treasury to release names of some businesses that received PPP loans [Axios] – “The Treasury Department and Small Business Administration plan to release the names of businesses that received $150,000 or more in Paycheck Protection Program loans, the agencies announced Friday.”

File this next one away because some day you may need it:

How to fight an outrageous medical bill, explained [Vox] – “Five patients tell us how they pushed back — and won.”

Happy hump day!

shares