Dubbed the “infinite money cheat code” by users of Reddit’s WallStreetBets forum, the bug is being exploited, according to users on the forum. One trader bragged about a $1 million position funded by a $4,000 deposit. From a report: Robinhood is “aware of the isolated situations and communicating directly with customers,” spokesperson Lavinia Chirico said in an email response to questions. The Menlo Park, California-based money-management software designer touts trading “free from commission fees.” Robinhood Gold customers are invited to “supercharge” their investing by paying $5 a month to trade on margin, or money borrowed from the company. Here’s how the trade works. Users of Robinhood Gold are selling covered calls using money borrowed from Robinhood. Nothing wrong with that. The problem arises when Robinhood incorrectly adds the value of those calls to the user’s own capital. And that means that the more money a user borrows, the more money Robinhood will lend them for future trading. One trader managed to turn his $2,000 deposit into $50,000 worth of purchasing power, which he used to buy Apple puts.
of this story at Slashdot.
Source:: Slashdot