Following the tragic death by suicide of a 20-year-old Robinhood trader after he saw a $730,000 negative balance in his account, the company’s founders released a statement pledging to tighten eligibility criteria, educational resources, and upgrades to its user interface for customers trading options.
In a statement on Friday, Robinhood co-founders Vlad Tenev and Baiju Bhatt said that they were “personally devastated by this tragedy,” and pledged to “improve Robinhood’s customer experience” in the future. The company is specifically looking at making adjustments to its platform around option flows involving multi-leg exercise and assignment.
Robinhood is also working on changes to its user interface, namely the way buying power is displayed: In Kearns’ case, although his account showed a balance of $16,000, he misinterpreted his negative $730,000 buying power and cash balance as debt that he owed.
It was likely that Kearns was similarly involved in what is likely a “bull put spread,” which involves selling put options at a higher strike price, and buying puts at a lower strike price, both with the same expiration. Robinhood is now pledging to add new criteria and educational resources for customers seeking to buy and sell options, in order to ensure they more fully understand the speculative nature of the trades.
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