If someone sells a naked call an it goes badly and the investor's account is insufficient to satisfy the obligation who covers it? For example if a Robinhood investor sells a naked call for 100 shares of TSLA at 100 and it goes to 1000 and they don't have the cash or the shares to meet the obligation. Does the broker have to deliver the shares and have to then recoup their losses from the investor?
I believe yes, and that’s why you agree to all the bullshit you do when you apply for option buying/selling/trading
Is that what has Robinhood scared shitless? They see blowups and they don't have the capital to cover the counterparty risk when their accounts blow up?Originally Posted by haftafish22
No, they see an ally getting their brains beat in
What if they have billions of dollars they have to come up with to meet counterparty obligations and they don't have it?
I’m unsure, but they didn’t halt options, they halted everything. If you believe that their reasoning is what’s stated above, I have some ocean front here in Oklahoma with a nice beach house.
The truth is, they halted all of these stocks, including other brokerages, because they had people with big money tell them to do so. This magic drop allowed for time to cover shorts, short more, and take advantage of the situation that imo was no choice of an individual brokerage. The SEC has guidelines and they should be the governing authority on halts. Not brokerages worried about “my” money. Webull was no different. Hell, I saw a screen shot where Robin Hood sold gamestop stock position for someone without their permission, and at $160 bucks to boot. It was and is trading twice that.
not sure where this all falls but it’s crockery. Plain and simple.
That may be why they did it but I think there may be serious concerns from this similar to the financial crisis of 2008 where we have brokerages blowing up when they can't meet their obligations. My main question is why are the clearinghouses concerned about capital? If that is true that normally means they have concerns over the other party's solvency or collateral. Gamestop could turn out to be a minor sideshow if there are solvency issues.I’m unsure, but they didn’t halt options, they halted everything. If you believe that their reasoning is what’s stated above, I have some ocean front here in Oklahoma with a nice beach house.
I’m pretty sure RH has no right to sell someone’s position without their permission unless it is hidden deep somewhere in the EUA
I think all the B.S that went on with the halting and not allowing people to buy shares is so the big firms can stop their bleeding and cover their asses. The retail traders are on a mission to expose their wrongdoing that has been going on for too long. You cannot short without collateral while these big firms such as Melvin Capital are allowed to sell shorts without collateral.
It may be the brokerages are bailing out the hedge funds or it may be the brokerages are concerned they could be squeezed by the margin and option trading levels they handed out. I certainly hope there isn't a solvency issue. It wasn't that long ago we had the repo rates on overnight lending go double digits between banks in what is mostly a boring and routine part of the market. I get nervous when I hear about financial markets locking up. I hope it is just a scandal between hedge funds and brokerages but here is what the Interactive Brokers CEO had to say in terms of what happens in clearing options transactions. I really don't want to have to worry about the integrity of transactions and
trades.
No doubt Robinhood has a problem with capital. Not only are they drawing on capital lines they are also get a billion from private investors.
https://www.nytimes.com/2021/01/29/t...ndraising.html
Whats interesting to me and smells real bad is that in every explanation of why Robinhood stopped traders from buying, they described situations that require margin. I have yet to see an adequate explanation of why a cash account shouldn't be allowed to buy.
Also, lets say Robinhood has a legit explanation, they didn't have enough capital. Are we to believe that the other brokers also don't have enough capital. Later in the afternoon, even Etrade stopped me from being able to buy GME on a cash account! You telling me Etrade has enough people trying to buy GME that they don't have enough capital! Bullshit. And if Etrade and the other big boys don't have enough capital then we have bigger problems on our hands.
Now, this morning I can buy GME on Etrade. So what happened? Did Etrade tap credit lines? IF that happened, if other brokers are tapping capital lines then we have problems and the market sells off big time. But I don't think thats the issue.
My conspiracy theory hat, and easiest explanation tells me, online brokers gave market makers, and short funds a breather to adjust. But thats just my opinion.
Your theory is what many people are thinking. The brokers gave time outs to drive prices down and so the big shorties can sell their other positions to cover their losses. They accomplished that by going further and not allow more shares to be purchased yesterday.
That CEO f’ed that interview, he admitted to wrongdoing on camera.He also seemed to be reading off of the same b.s prepared statement that Robinhood sent out
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