You may have heard about it in the news, but Robinhood had a way to let their users gain "infinite leverage" using a "cheat code" Like my momma always said... "
Just because you can, doesn't mean you should," and we will cover exactly why you shouldn't use this cheat code on today's podcast!
The problem here is that Robinhood had $2000 of his actual cash but gave him leverage of roughly $4000. But when he sold the call, rather than giving him $200 in credit, they gave him $2000 in credit into his account.
His buying power got basically fully replaced by selling the calls, when it should have been about 10%.