Terms, Cookies and Privacy Notice. T: It was an opportunity to be free from the chains of tuition and mortgages in one trade. Robinhood allows the premium to be used as collateral, so now they give you the buying power of 400 shares. "After realizing I only had a few thousand dollars to gamble, I decided why not try this new 'glitch,'" Call_Warrior wrote. For example, buy 100 shares of General Electric with cash, another 100 shares on margin, and sell two deep-in-the-money calls with a $1 strike price. It is too bad they have disabled the feature, it really was one thing that made Robinhood stand out from the other brokerages. [Robinhood confirmed the glitch is not a feature in an email to Business Insider.]. Robinhood revealed earlier this year that 75 percent of its transaction volume went through its Gold product. MoonYachts explained how they pulled off the trades and told other users "DON'T DO THIS.". “…Is this what a financial collapse looks like? Call_Warrior apparently saw the glitch's limitless potential as a challenge, commenting on Wednesday morning about plans to "buy as much AMD as possible" and saying the motivation to post the trades came from seeing other traders' disappointing positions. This field is for validation purposes and should be left unchanged. Thank you. Robinhood allows the premium to be used as collateral, so now they give you the buying power of 400 shares. Seems pretty fun…” https://www.reddit.com/r/wallstreetbets/comments/drt5tr/guh_of_fame_2019/f6pjfmi?utm_source=share&utm_medium=web2x, Finance Magnates is a global B2B provider of multi-asset trading news, research and events T: As far as I'm concerned, it's not a glitch, but a feature. More specifically, when traders are selling leveraged covered calls, Robinhood mistakenly tops up the values of these trades to their accounts’ equity, which in turn qualifies them to get more leverage. I emailed support to tell them, but they did not respond and essentially said, "Stop talking to us, you are banned." Robinhood locked his account before he could make any trades, but he was able to withdraw $10,000. ... your buying power … Commerce Policy | Another user supercharged his $4,000 deposit to open a … We will send instructions to reset Registration on or use of this site constitutes acceptance of our Terms of Service and Privacy Policy. Tomatotowers learned about the bug on WallStreetBets, a subreddit with the tagline "Like 4chan found a Bloomberg terminal." Registration on or use of this site constitutes acceptance of our Terms of Service and Privacy Policy. You can use all of your Gold Buying Power when you buy stocks, though sometimes you can’t invest it all in one, single stock. The Gold subscription allows Robinhood users to use margins in order to embellish the buying power with little to no regulations. I have been trading for about a year. Robinhood provided the following statement: "We identified a small number of accounts engaging in problematic trading activity on our platform. Robinhood admitted to the technical glitch, saying that the matter is being examined by the internal technical team to analyze and identify the cause, which led to the issue and to suggest solutions to prevent a recurrence. your password. T: No I was not. A member of the r/WallStreetBets subreddit who goes by Call_Warrior posted on Tuesday about using the trading glitch to leverage a deposit to hold more than $1.7 million worth of Advanced Micro Devices stock. Enter your email address below. Many users flagged this issue on Reddit and other social networking websites. We do not store your information and we do not disclose our sources. One person on r/WallStreetBets described the glitch as an "infinite money cheat code.". I may later reveal how to access it. BI: How did you find out about the Robinhood glitch? BI: Walk us through the trades you made and positions you took. Please open the email we sent you and click on the link to verify your account. I am now banned from Robinhood, but I don't owe them any money. BI: What advice would you give to someone considering exploiting a similar glitch? I'm now with a different brokerage. Robinhood was not hacked, but users of Robinhood were successfully targeted by cyber criminals, who gained access to their accounts and sold stocks. "After seeing people on the almighty wallstreetbets wager a timid 50k or so on average with this new feature available, I thought it was only a clear choice to raise the average for the good of all. "If there's an element of deceit, that you got this by exploiting a loophole in a system, I can see how that could become a securities fraud case," Donald Langevoort told Bloomberg, adding that the traders may also need to pay restitution on the borrowed cash. You can continue this process until you are sufficiently leveraged. Hopefully, we see more features like this from Robinhood, and as I stated earlier, I already see one that can be used. 3 Things You Should Know The stock-trading app is as popular as ever, but new investors can benefit from a few basic guidelines. All rights reserved. If you lose 5 million, it’s Robinhood’s problem.” GUH of Fame 2019 from r/wallstreetbets. Just Opened a Robinhood Account? T: When I started to use the feature, my account had $5,000. London Summit 2019 Launches the Latest Era in FX and Fintech – Join Now, A Reddit user reflected on this situation, saying, “Remember folks, if you lose 5 grand, it’s your problem. Made In NYC | Now read more markets coverage from Markets Insider and Business Insider: China is reportedly considering a $10 billion investment in Saudi Aramco's record-shattering IPO, Xerox is reportedly mulling a blockbuster takeover of HP, A job posting shows JPMorgan's consumer bank is assembling a 'recession readiness' team and drawing up a playbook to navigate downturns, NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption, Registration on or use of this site constitutes acceptance of our, Visit Business Insider's homepage for more stories, selling call options with money borrowed through the app, The CEO of one of the only funds that survived the Great Depression walked us through his unique, market-beating strategy - and shared 3 stocks he's betting on for the future, to turn a $4,000 deposit into a $1 million position, A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption, Global stocks slide as COVID-19 vaccine relief quickly fades with the US imposing new restrictions », Walmart is courting 'pet parents' with new insurance and dog-walking offerings ». Commission-free investing app Robinhood was hit by a trading glitch that apparently allowed certain customers to acquire an ‘infinite leverage’ while trading stocks on its millennial-targeting platform. For more information, read our The users exploited the company’s subscription product, Robinhood Gold, which offers margin trading and extended-hours trading. A Reddit user who exploited Robinhood's "infinite money" glitch told Business Insider he found it "exhilarating," he was "well aware of the risks," and he would do the same thing again if he could, only faster. T: I would do it again, and I would be a lot quicker about it. BI: What did you learn from the experience, if anything? © 2020 Insider Inc. and finanzen.net GmbH (Imprint). As a result of the bug, one trader turned his $2,000 balance into the purchasing power of $50,000, but the excessive leverage wiped out his account. Traders are one-upping one another with a glitch in Robinhood's trading app, and one user holds the crown after turning a $3,000 deposit into a $1.7 million position. Please check your inbox for our authentication email. It's near impossible to make $1 million on a $1,000 account, but on $100 million, a chimpanzee could make a million. ", The trade involves Robinhood Gold users selling call options with money borrowed through the app. Tomatotowers: I'm an undergrad student studying engineering and premed. Traders can repeat this cycle, and it seems there's no limit to how much a user can exploit the trick. ", NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption, Registration on or use of this site constitutes acceptance of our, Visit Business Insider's homepage for more stories, A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption, Global stocks slide as COVID-19 vaccine relief quickly fades with the US imposing new restrictions », Walmart is courting 'pet parents' with new insurance and dog-walking offerings ». I was planning on getting to $500 million and buying SPY calls for January 1 with a strike price of $310. Disclaimer | All rights reserved. Just be quick about it. ACY Securities Cements Position in the Middle East as a Leading BrokerGo to article >>. T: To anyone else trying to use this feature on Robinhood, go for it. © 2020 Insider Inc. and finanzen.net GmbH (Imprint). T: Knowing if I had made the right trade I could be retired now. BI: What was the experience of exploiting the glitch like? It's not immediately clear what the legal repercussions of the trade are, but one Georgetown University law professor warned that the Robinhood traders could face a range of consequences. The yet-to-be patched flaw, dubbed ‘“infinite money cheat code,’ is being exploited in the wild to take over unlimited buying power using borrowed money from Robinhood, regardless of whether the investor uses the full amount. Read more: The CEO of one of the only funds that survived the Great Depression walked us through his unique, market-beating strategy - and shared 3 stocks he's betting on for the future. This is because U.S. federal laws require all brokerages, including Robinhood, to have safeguards to prevent customers from losing too much money on a single, high-risk investment. We'll continue to monitor closely for any type of abusive activity on our platform and will take action as appropriate. When the iPhone maker traded higher the day the options expired, the Reddit user lost the borrowed money and later posted a reaction video on YouTube. Robinhood support confirmed you are allowed to use premium from covered calls as collateral. The app's bug was discovered by an r/WallStreetBets member who goes by ControlTheNarrative, who said they used the glitch to turn a $2,000 deposit into $50,000 worth of Apple put options. Days later, someone with the username MoonYachts said they exploited the bug to turn a $4,000 deposit into a $1 million position. https://www.reddit.com/r/wallstreetbets/comments/drt5tr/guh_of_fame_2019/f6pjfmi?utm_source=share&utm_medium=web2x, BDSwiss Launches CFDs on 1000 Stocks, Exchange Traded Funds, Andrey Dashin’s Exinity Brand Gets FX Broker License in Kenya, Your Invitation to the Finance Magnates Virtual Awards Ceremony, Robinhood Bug Allows Users to Trade on Unlimited Leverage. I got about $300,000 worth of leverage. After Robinhood locked my account and liquidated my holdings, I had $10,000 and was able to withdraw it. The company didn't comment on when the bug would be patched, but the app received an update on Tuesday. Unfortunately, Robinhood locked my account before I could place any trades. Stock quotes by finanzen.net. Business Insider has reached out to Tomatotowers for screenshots from his Robinhood account and will update when we hear back. We've quickly restricted these accounts, and made a permanent update to our systems intended to prevent anyone from engaging in this pattern of trades. Do let us know and we'd be happy to check ourselves and fix if necessary. Robinhood then incorrectly adds the value of the options sold to the user's cash pile, giving them more buying power. Scroll down for Tomatotowers' interview with Business Insider. Leave your name/email (not required) if you'd like to be contacted about this story (will not be disclosed): Be it a typo or a factual error - we do our best but we are also human! As a result of the bug, one trader turned his $2,000 balance into the purchasing power of $50,000, but the excessive leverage wiped out his account.

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