
Robinhood user exploiting margin loophole to turn $4k into $1M position - undefined3840
https://www.reddit.com/r/wallstreetbets/comments/drqaro/robinhood_free_money_cheat_works_pretty_well_1
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undefined3840
If I understand it correctly, the user bought stock in a company (in this case
$F) and then sold deep in the money call options, which is returned to your
account as cash which is being mistakenly calculated as additional buying
power. He then used the additional cash to buy more stock, and repeated the
cycle to get to $1M.

This is a massive accounting issue on RH’s part and almost certainly breaks
FINRA rules for margin trading.

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pnako
> which is returned to your account as cash which is being mistakenly
> calculated as additional buying power

Almost, but that's not exactly the issue. In fact, the issue is probably
worse. If you write those calls, you definitely get actual, real cash for
them. So that's not the problem. But if you wrote deep ITM calls (as is the
case here), your stock on the other hand is virtually gone. So the issue is
that they compute an incorrect value for the resulting portfolio (you can see
it in the screenshot, where it says "$3,999.88 portfolio"; that is definitely
wrong). The cash part is correct; to some extent the stock part is correct
too, but if you add the outstanding calls in the mix, the portfolio value is
in fact pretty much just the cash (plus a small premium).

