Do you read just the headlines? Guru explained that there was no loss when you netted his positions.
Rookie Trader Racked Up $700K In Debt
- Thread starter ironchef
- Start date
First of all, we need to make one thing clear: He might NOT have really racked up $700K debt. What the guy did was a credit bull spread using puts. That negative 700K balance that he saw was just his most likely ITM short side settling without his probably also ITM long side settling at the same time. The guy thought that his positions should've cancelled each other out and he was right. So really the most important question is if he had doubt and needed answers, WHY didn't call his broker in this case Robinhood to verify and confirm everything? Granted he was freaked out, WHY didn't he call someone, talk to someone, anyone?!! Log onto a forum, pose the question. If he had logged onto here and posted his questions and situation here, many of us would've told him what's happening and what he should do. But he just went ahead and took his own life??!! WHY? That's the biggest question that needs answers.
Yes granted the design of that trading software is not perfect and leaves much to be improved. But we are humans and if you are old enough to invest money, you should at least be emotionally mature enough to handle everything that happens to your investment, winning or losing, mature enough to at least find out information. Even if he thinks he's on the hook for $700K, how did he think he's going to repay it given he's only got $12K in the account? He would still need to talk to his broker to make payment arrangement. And he thinks that escaping by dying is the answer? I don't want to be unkind to the dead but really that thinking by itself is quite naive. Even if one's dead, one's estate is inherited by his/her next of kin, in his case, his parents and siblings. If he really racked up that $700K debt, it would still be his parents and his siblings and everyone who's inherited his estate who would have to repay that. There is no escaping in that.
When in fact, he actually might not have racked up any debt, his account might be fine depending on the spread of his two puts in the vertical. So he might have taken his own life for nothing, for just not communicating.
Bottom Line: No matter what you do, communicate, people, communicate!! Don't keep things to yourself!!
Yes granted the design of that trading software is not perfect and leaves much to be improved. But we are humans and if you are old enough to invest money, you should at least be emotionally mature enough to handle everything that happens to your investment, winning or losing, mature enough to at least find out information. Even if he thinks he's on the hook for $700K, how did he think he's going to repay it given he's only got $12K in the account? He would still need to talk to his broker to make payment arrangement. And he thinks that escaping by dying is the answer? I don't want to be unkind to the dead but really that thinking by itself is quite naive. Even if one's dead, one's estate is inherited by his/her next of kin, in his case, his parents and siblings. If he really racked up that $700K debt, it would still be his parents and his siblings and everyone who's inherited his estate who would have to repay that. There is no escaping in that.
When in fact, he actually might not have racked up any debt, his account might be fine depending on the spread of his two puts in the vertical. So he might have taken his own life for nothing, for just not communicating.
Bottom Line: No matter what you do, communicate, people, communicate!! Don't keep things to yourself!!
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No he just died by not communicating. If he had just TALKED to somebody, anybody, he would've discovered that his account might be fine and even if there was losses, the losses was small. But he just kept everything to himself and thought death was the answer. That was the problem.
What about a glass of wine or white cognac ?
wrbtrader
Only if you are above 21 from where I live. Since he was 20, he wouldn't had been allowed. So sad I had to use past perfect verb tense in that sentence.
Feel sorry for his parents. Apparently he committed suicide to shield his parents from the debt that he thought racked up but it's his parents who are suffering the most right now.Sentence sounds and is nonsensical. I don't like you JSOP. I have millions in debt. I am going to name you to inherit my estate. You are now going to be personally liable to pay off my debts. It sounds like a great way to get even with somebody.
Be serious. The family will inherit nothing because there is nothing in the estate after payment of debts. Bottom line They are not personally liable for his debts
Only if you are above 21 from where I live. Since he was 20, he wouldn't had been allowed. So sad I had to use past perfect verb tense in that sentence.
I started drinking wine & cognac in college when I was 18. It was very easy to pay an upperclass student or grad student that to go to the liquor store to buy alcohol. Remember, he was a student that had attended the University of Nebraska.
That's a big time party school...had a close friend from high school that played college volleyball there on scholarship. They party hard at that school even at the age of 18, 19 and 20.
Regardless, I've rarely ever met anyone mature in financial matters at the age of 20 years old. Seriously, give a 20 year old college student a credit card in a party town (location of the university)...the credit card will be maxed out before the semester is complete.
As for brokers...I've always believed brokers should be more responsible for the clients and if they didn't believe so...they should at least have online classes about understanding their trade execution platforms, understanding margins / leverage, risk management and anything else that the clients must pass a test to activate their trading accounts...to prevent any misunderstandings about the trade execution platform and trading itself.
Very similar to what the CME Group does to traders in their simulation trading tournaments that place on the leaderboard and win a place prize. Simply, to claim your prize...you must pass those online tutorial videos (answering the questions after viewing the videos).
Seems like a ridiculous suggestion but its shocking how many traders are trading that do not understand the details about their trade execution platform, don't realize after the settlement of the trading day they will get broker statement sent to them at night via email and so on.
The abuse of leverage is common place in trading. Robinhood is not the only one...most other well known brokers do the same although they don't make their platforms attractive like party poppers showing up on your screen after a trade is place or a winning trade.
Heck, most online gambling sites don't even do that because they know its a trick to make gambling addictive.
P.S. Parents are only liable for someone's debt if the parents sign something along with using their credit history to open the account for the student...similar to some student loans / credit cards / students first apartment and such.
wrbtrader
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This is what happens to your debt when you die: https://www.nerdwallet.com/blog/finance/debts-after-death-life-insurance/#:~:text=Your debts become the responsibility of your estate after you die.&text=The executor of your estate,property to get the money.
No death does not erase anything. If he really racked up that $700K+ debt, whoever inherits his estate by default in this case his parents and siblings, if any, unless he had a will written up that named other beneficiaries, would've inherited all that and could be on the hook to repay his negative cash balance. The paragraph does say that the debt is only repaid up to whatever is owned by the estate when one died so I am not sure how the family members who happened to have inherited the estate would be on the hook to repay the debt if there was any but that is a possible scenario.
I don't make up the law.
. You just like to argue. You just can't admit you are wrong so you hedge your answer:I am not sure how the family members who happened to have inherited the estate would be on the hook to repay the debt if there was any but that is a possible scenario.
"Possible scenario" "I don't make up the law." Why do you come up with this nonsense other than assuage your ego for being wrong. An inheritor is not personally liable for the debts of the deceased. The executor of the will doles out the assets of the deceased. The first in line are the creditors then the family if no one is else named. Whoever inherits the estate is not personally liable for the debts of the deceased.
"The executor of your estate, the person responsible for dealing with your will and estate after your death, will use your assets to pay off your debts. This could mean writing checks from a bank account or selling property to get the money. If there isn’t enough to cover your debts, creditors generally are out of luck.
Give you your complete name and address. I want you to be responsible for my debts. What a stupidity on your part.
He didn't really die by immaturity in financial matters. He died by just not communicating and keeping everything to himself! Few people are really mature in financial matters at the age of 20 let alone trading in derivatives but like I said before, he should be mature enough to ask questions, especially about something that is as important as is money.
I believe true the brokers are responsible in doing some due diligence and fiduciary duties toward their clients in terms of investment appropriate to their financial knowledge and wealth level but there is only so much hand-handling that they can do. Unless Robinhood has violated the client suitability requirement by failing to know their client, they wouldn't be responsible if somebody who intentionally misrepresented their financial information just to get a trading account with them. In this trader's last note, he stated how could he get million dollar leverage to trade with no income. Well unless Robinhood didn't ask about his income when he was applying for his account, but if he was able to obtain an account with no income, with all due to respect to him, was he really being truthful on his application?
Well I have very bad news for you that not everything is completely right or wrong. You need to freaking READ!!! I already admitted that in this case, true, one's debt is only repaid up to whatever is owned in that person's estate when he/she dies but family members could still be on the hook for any debt. I am not wrong that that could still be a scenario. You don't know how somebody's financial situation was set up.
I don't mind being shown that I am wrong but if you are going to force me to admit my wrong, you are never going to get it. F--- off!!