Robinhood Options trading something to think about

C

caacapital

I've been using robinhood for a while now. I had a short put SPY spread $1 wide 288/289 expiration 11/16/18. 10/24/18 i was assigned on the short side 289 SPY put. 10/25/18 i have 100 shares @ the price it was exercised my plan was to sell the shares then sell the option or maybe keep it but about 1 hour into the day both the shares and my long put option disappears but my balance still reflected the fact that i owe -100 shares. So of course I immediately look for a way to contact them and they still only have an email contact so i email them actually 3x the first was to ask how long i had to sell the shares 2nd after my long put and shares disappeared 3rd time when i thought they had a live chat support. finally at the end of the day in my history i see the long side of my option had been exercised which makes no sense I emailed them during the day yesterday no reply to my question until after the close and it was basically not an answer just an explanation of what being assigned means. Bottom line if you trade options in Robinhood I would recommend you weigh the fact that this could happen to you. where when you get assigned you basically have no control over how you handle it. I can see maybe selling the shares but to actually exercise my long option that is no where near expiring not even 2hrs into the trading day is crazy. I will be closing my account with them after this is settled.


No customer support and no control over your options
 
C'mon man. You didn't have the net liq to support the position. You had a position worth a couple of pizzas which was assigned into the req on 100 shares of SPY. You're lucky that they allowed you an hour to cover... which of course you ignored.

No control over your assignment? No shit.

Stop. Trading. It's not for everyone.
 
Ive been trading options since 2015 I have Td and tastyworks accounts and have been assigned before note these places have real customer support that you can call or they call alert you to sell/buy to cover. Ive been assigned on (3) NFLX options before the split at TD and I was able to buy them back cover the assignment. at worst they would either buy/sell the shares and you would owe the difference. instead of doing that robinhood with no live support exercises my long put that. During that entire time their real risk was max $2,100(with i have deposited more than that into this account and if they are worried about that amount maybe they shouldnt do instant deposits) and thats if i sold the shares at the open and the market rallied back up to 290 which btw i have naked calls open. simply selling the assigned shares makes more sense to and as a customer i an exercising my right to not do business with them anymore.

destriero said:
C'mon man. You didn't have the net liq to support the position. You had a position worth a couple of pizzas which was assigned into the req on 100 shares of SPY. You're lucky that they allowed you an hour to cover... which of course you ignored.

No control over your assignment? No shit.

Stop. Trading. It's not for everyone.
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You are assigned on a 270 dollar stock. Your 100 shares represents $27,000. Even with margin, you need to have $13,500 in your account, plus the price of the put, to hold this position. Granted you have no risk with this position, but that doesn't matter, you don't have the funds to hold it.

What did this liquidation cost you? Almost nothing. By being assigned and exercising both sides of this spread, you essentially bought back your short vertical for $1. Its worth a few cents below that at most, so at worst it cost you about $3 vs fair value. With any other brokerage the commissions would have cost you more.

I do find it troubling that it is so difficult to reach customer service, but you knew you didn't have the money to cover the margin requirement and you had an hour to cover yourself, so it seems very reasonable what they did.
 
Robinhood doesn’t even support short selling, so if you were assigned -100 shares that you owed then your account needed to be locked out until the next day when they handle this and exercise your other options.
Assignments do happen at all brokers and can create a mess, though others do give you much more control.
Still, nothing special happened, thousands of people go through that every day at Robinhood and learn, so it should be just learning experience for you. Since it’s free you can’t count on support, so do consider a better broker when you want to trade more of those.
 
In my case yes it didnt cost me anything i actually made money on it I would have made more if i had control of how i wanted to handle it like i do at TD and tastyworks. My main issue is in a situation like this you want to have customer service. I also said I "contacted" them 3x if they had real support they would have known what i was doing or at the very least I would've been aware that they intended to close a position that I would want open(my naked long put) I would have easily deposited the amount to cover the $2100 put option. As I've said been trading options since 2015 I know my real risk my thread is named something to think about. For new people which is who Robinhood aims for with their instant deposits where you can basically trade on credit they may want to think about this.
For me I would rather pay tastyworks fee because my strategy for options includes potentially getting assigned since i leg in an out of spreads. Its a day later and the only contact out of 3 emails is a generic explanation of how assignments work which i didnt ask my question was why my balance showed -100 share balance but i have no shares or long put. the first question even before the market open was how long i had to cover the shares. At every broker I have been with a have at least once needed to contact them for something either i couldnt access the platform and needed to sell or a question on a fee. I was blinded by the "free" service there are probably others that trade similar strategys that are assuming that it will be handled as other brokers handle them which is simply to sell the stock. I will keep the stocks i have but I cant trade options there.



FSU said:
You are assigned on a 270 dollar stock. Your 100 shares represents $27,000. Even with margin, you need to have $13,500 in your account, plus the price of the put, to hold this position. Granted you have no risk with this position, but that doesn't matter, you don't have the funds to hold it.

What did this liquidation cost you? Almost nothing. By being assigned and exercising both sides of this spread, you essentially bought back your short vertical for $1. Its worth a few cents below that at most, so at worst it cost you about $3 vs fair value. With any other brokerage the commissions would have cost you more.

I do find it troubling that it is so difficult to reach customer service, but you knew you didn't have the money to cover the margin requirement and you had an hour to cover yourself, so it seems very reasonable what they did.
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caacapital said:
In my case yes it didnt cost me anything i actually made money on it I would have made more if i had control of how i wanted to handle it like i do at TD and tastyworks. My main issue is in a situation like this you want to have customer service. I also said I "contacted" them 3x if they had real support they would have known what i was doing or at the very least I would've been aware that they intended to close a position that I would want open(my naked long put) I would have easily deposited the amount to cover the $2100 put option. As I've said been trading options since 2015 I know my real risk my thread is named something to think about. For new people which is who Robinhood aims for with their instant deposits where you can basically trade on credit they may want to think about this.
For me I would rather pay tastyworks fee because my strategy for options includes potentially getting assigned since i leg in an out of spreads. Its a day later and the only contact out of 3 emails is a generic explanation of how assignments work which i didnt ask my question was why my balance showed -100 share balance but i have no shares or long put. the first question even before the market open was how long i had to cover the shares. At every broker I have been with a have at least once needed to contact them for something either i couldnt access the platform and needed to sell or a question on a fee. I was blinded by the "free" service there are probably others that trade similar strategys that are assuming that it will be handled as other brokers handle them which is simply to sell the stock. I will keep the stocks i have but I cant trade options there.
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When you sell options for premium, you accept the fact that if your option is in the money, the option buyer at his discretion could exercise that option at any time! The broker whichever one it is has no say when it is exercised! That depends on the option buyer. You do not get to choose the time of exercise. It is a contract between you and the buyer of the option. Otherwise, why would any option buyer buy that option if the day it is actually exercised is decided by the seller?
 
smallfil said:
When you sell options for premium, you accept the fact that if your option is in the money, the option buyer at his discretion could exercise that option at any time! The broker whichever one it is has no say when it is exercised! That depends on the option buyer. You do not get to choose the time of exercise. It is a contract between you and the buyer of the option. Otherwise, why would any option buyer buy that option if the day it is actually exercised is decided by the seller?
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I think your misunderstanding what I'm saying I know how options work and I understand that any short option can be exercised that isn't European style. My issue was #1 no contact with customer support, #2 they did exactly what you said a broker doesn't do they choose to exercise my long put to cover the short put that I was assigned on. Again the long put had intrinsic value of about $21 maybe $22 max during the day yesterday but instead of simply selling the shares that I was assigned to buy they close my option to cover it. This practice is not ideal for my trading style. This is simply a warning to others that trade options with them.
 
caacapital said:
I think your misunderstanding what I'm saying I know how options work and I understand that any short option can be exercised that isn't European style. My issue was #1 no contact with customer support, #2 they did exactly what you said a broker doesn't do they choose to exercise my long put to cover the short put that I was assigned on. Again the long put had intrinsic value of about $21 maybe $22 max during the day yesterday but instead of simply selling the shares that I was assigned to buy they close my option to cover it. This practice is not ideal for my trading style. This is simply a warning to others that trade options with them.
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If you use margin, it is the broker's monies you are using. That is why you get margin calls. They will protect their capital knowing if things go south and you have no monies left, they will eat up the loss! They do not give advance warning on what they will do. If you are all cash and do not use margin, the broker just cares about his commission. Of course, they will exercise options in the money if asked by the option buyer. Most option buyers do not exercise and just close their position by buying their option back.
 
smallfil said:
If you use margin, it is the broker's monies you are using. That is why you get margin calls. They will protect their capital knowing if things go south and you have no monies left, they will eat up the loss! They do not give advance warning on what they will do. If you are all cash and do not use margin, the broker just cares about his commission. Of course, they will exercise options in the money if asked by the option buyer. Most option buyers do not exercise and just close their position by buying their option back.
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Another issue I have with there is no option to trade options without margin. Almost out of my spreads of course the ones where I’m net positive on the market makers the flow goes to think that its only worth 0.50 for a $1 wide spread but Are showing over $1 for my credit spreads to close smh.
 
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