I OWE ROBINHOOD $30,000!?!? The REAL Risks Of Day Trading

All right, ladies and gentlemen, I hope you're having a wonderful weekend, but if you were like me, you probably woke up this morning and you ended up owing Robinhood a lot of money. Now, you guys have seen this account. We've talked about, you know, 150 bucks, turning it to 1,800, then it comes down, we're back at 1,000, but how in the world did they let an $1,000 account, actually, let's come here. See, it says portfolio value at $1,000, but literally, I owe $29,722 to Robinhood in stocks. My buying power is now negative. It literally says I have $30,000, and I only put $100 in, I need a new manager! You guys are sending me DMs, you're sending me emails, you're freaking out, this is ruining, none of this could make sense, and you are right, but you're wrong. So this video is not clickbait. I wanna talk about what happened here, and let me actually assure you, I know a lot of this had this happen to you because you've been playing with the spreads, and I'm glad you have, and you guys are seeing some of the high probability, and this is a good learning experience, but let me reassure you, nothing is wrong. Don't take my word for it because this is a giant wake-up call for all of you. One, regardless of what I say here, you guys are gonna need to go through your account just like I did, and do the math yourself, and again, you can always reach out to Robinhood, and I'm gonna show you, I even sent them an email just to make sure, I already got a response back, so I'll share that with you guys, but the next best part about all this, this should be a wake-up call to understand what you guys are trading. Now, and I don't mean that in a negative way, like, hey, yeah, you should've known what you traded, huh, yeah, why would you even talk about trading if you don't even know how to do it? Why would you even wanna, you know, try to better yourself and learn how to do something? Huh, yeah, I'm so ******* great. No, what I am saying is, though, understand, and the more understanding you get from this, you'll be able to understand what is literally happening here, so you won't panic, and you'll be able to see how this worked to your advantage, and actually, in this case, I will do the math with you, this ended up benefiting me. So remember, I was even talking about it on Friday because that day, I pretty much, with the market dropped, I should've made more money, and by the end of the day, you know, how it all worked out, I had these SPY spreads, and then we got assigned an exercise, but I was like, man, I could've made like 600, 700 bucks, but I actually ended up making money from Robinhood doing this. So I wanna show you guys that, and we'll talk about this, so one, I wanna reassure you guys, run through the math so you can learn about this, and in the process, we are gonna talk about spreads again, and you guys are gonna learn the difference here between exercising and assignment. So let's get into this, make sure you guys drop your thumbs up on the video, make sure you subscribe, we got that nightly watch list coming tomorrow, and every single night, there is a trading day, and we like to post these videos on the weekends, some educational tutorials, and make sure you are live, because we are live Monday through Friday, 30 minutes before open, and you can come watch us trade live for seven hours a day, tune in, all we ask is you drop your thumbs up on the video and be positive and respectful, and if you guys have been seeing these lives, I need your head in the game. It's game time, there's opportunities to make money, and this was even a big highlight. We've been focusing on being able to take small amounts of money, keep it there, but the key is, even with this, there's been big drawdowns and big draw ups, the key is how long can you last in the game, and that's why we've been incorporating these spreads to be able to take a higher probability strategy when there's not as many volatile plays available, and collect premium and cash up until you have the right moment to now start buying some of these options, and it looks like that, we're turning that corner, and it's right there, so let us talk about this and how we got to this situation. So coming back to here, you see the account, and it's saying our total portfolio value is $30,000, because think about it, minus 29,000, plus whatever, cash, or however this works, again, it doesn't make sense, but even when we come to the account history, it doesn't make sense, and why would they let this happen? Credit spread, so it was a call credit spread, where again, we wanted to collect a credit, so what did we do? We sold a 27.50 call, and then we bought a 28.50 call, and the whole idea was, if the stock ended below 27.50 by the expiration, 9.20, we would have made the credit, the difference between these prices, so I'll make it easy, and I'll show you here, and even then, this is what a lot of you guys are tripping about, it says negative 7,800 buying power, is that true? Technically, yes, technically, no, and that's the whole concept of here, do I really owe them 30,000? Yes, I do, however, by the way that spreads are supposed to operate, you have paid for insurance already, so they just have to process it and give it some time, and I'll show you the email we sent, but back to what the spread is, and this is what it is, you know, the stock's trading at 29.60, what we did was, we sold a call, so we sold, let's say, the 29, and then we bought the 25, so this is what I mean, you could have sold the 29 for 76 cents, bought the 25 for 41 cents, and now, if the stock ended below 29 by expiration date, you would have collected that $35 credit, but now, what is your risk is, if it stays above 29, or even 29.50, you lose whatever it is minus the credit you received, but again, looking at the history makes it simple, and this is literally what happened, and now what happened with a lot of people, we got assigned, so what does that mean? It means, here, we agreed to offer somebody, by selling this contract, we said we would give them 100 shares of Bank of America at $29, and then we bought the 29.50, so we paid someone to agree to sell us 100 shares at 29.50, and we agreed to sell it at 29, so coming back to a lot of your histories, and again, if this happened to you, I encourage you to look through your history here, that's exactly what happened. We got assigned on the 27.50, so, and this is the difference, when you get assigned, that means you sold a contract, and somebody's saying, hey, I want what you agreed to buy from me, or what you agreed on the other side, so by selling a call, we agreed to give somebody 100 shares at 27.50, so we got assigned, so literally, we sold 100 shares of Bank of America, because we didn't have it, so we sold that for 27.50, because we took 100 shares, borrowed them, and sold it to them for 27.50, because they agreed to pay for us, but now, what happened, that same spread, we bought the 2,800, so what did we do here? We exercised, so exercise, when you own the right, you exercise, when you owe the right, you assign, so let me say that one more time, when you own the right, you exercise, when you are short, and you owe the right, you get assigned, so that's what happened here, we exercised our contract, because we got assigned here, and we said, buy these at 2,800, and now, somebody agreed to sell us Bank of America at $28 a share, even though, this whole time, Bank of America's trading at $30 per share, that's the key to all of this, but even then, we went negative 27.50, but then, by that occurring, that triggered another chain reaction, and we automatically exercised here to cover it, that's how this was even allowed, so why in the world would Robinhood let a $100 account, a $500 account get 27.50, because you have collateral, you have equity, you know, if you had no job, no employment, bad history, would a bank give you a loan? No, but if you own the right to something else, did you really need $2,800 to do this play? No, you just needed the $50 difference, because that's what happened here, because even if, worst case scenario, these guys assigned you, it would cost you 27.50, but then, you own the right at 2,800, you only have to pay the difference, so if you think about it, on this whole trade, we lost $50, because that's the difference between these two, but when I did that trade, I collected a credit, so in this case, it would be 35, but when I did that trade, I collected $41, so realistically, if we lost $50 here, and we collected $41, at the end of the day, on my full account, this is gonna be a $9 loss, so it's saying big numbers, all these big numbers, but it was only $9, so now, that's the same exact thing here that occurred with these SPs, so this is where it gets to 29,000, because why did they let my $100 account now do 29,000 here? I got assigned on both of these, so think about it. What does assignment mean? That means I agreed to sell somebody shares at a certain price, meaning I went short on a call, I sold premium on a call, so I sold a 297 call, and I sold a 296, 100 shares equals these amounts at those call prices, so again, this is status confirmed, I sold 100 shares, because I agreed to give that to somebody, so why does it, think about why this shows up as positive, I got credited this amount, because you go short, when you go short, you collect the cash, but don't focus too much on that, we're gonna focus on the dollar amounts here, but by getting assigned, I agreed to sell somebody shares at 297, so I sold it to them, and then the 296, so let's break out the calculator here. I agreed to sell somebody 29,699.37, and then, I got assigned on this one, again, also confirmed, but 29,599.37, this is now $59,298, so now, that is what I pretty much get credited in cash, but now we need to get this money back, so then I got exercised, so then, I had the right to buy the 298, so, minus 29,800, and now we're left with 29,498, and then, we're waiting on the final one here, SPY limit by 29,991, and boom, we're left with $111 credit, and that's what happened, so think about that, I've now covered both of those, so if you guys see what happened, I got assigned on these two, and that was the amounts, I got exercised, minus that 29,000, and then I owed 100 shares of S&P, but since it dropped it, this is how it worked in my favor, instead of exercising me at 300, they exercised me, they just let me buy the shares at a lower price, so then I got 299.11, and that left me, remember, all of that cash in the beginning out of that 59,000 was all credit, so I'm actually walking away with the extra $111 in my bank account there, or my Robinhood account, and then, somehow, it's saying I had this $300 call, and it sold it for me, for an additional 138, I walked away with an additional $200, and that's pretty much it, but now, still need to let all of this confirm, so again, I'm walking away with the positive balance, and that's why I was able to make, literally, an extra $200, 219 after hours, it makes sense, we'll see if it works like that, but do you see how, even in a way, that's because the S&P dropped, so they chose to assign me, but now, if they were able to fill me at lower prices after hours, I don't know who got screwed in this, it was most likely the call buyer, but again, even if I didn't get assigned, I would've made the money, but hopefully you're seeing, and now, here's the key, and I'll teach you guys to do this, because again, go through your account, and run the numbers, and run the math, and all you have to do is go through your account history, and add up, hey, what did I owe, what did I get assigned at, that's money that's cash, and then, exercise is money you spent, and then, go through the balances, so even the numbers you see here, even though it's saying I'm down 1,900, or this and that, all these numbers are incorrect, because some are gonna be settled, some are gonna be unsettled, and that's what you have to watch out for, but now, here's what I'm telling you guys also to do, if anytime you get assigned, and just to double check, it's funny, because when you get a spread, you get insurance, I'm telling you, you get double insurance on your insurance, how you could do that is email your broker, so I did this right on the next morning of, we were talking about it, I did this while I was on stream, you guys didn't even know, I think I said it out loud, I said, yeah, I emailed them, but look, it's 7.16 in the morning, I emailed them, and I said, hey, I got assigned, but I said, please close my spy spreads, and make sure both get assigned on both sides, I meant to say assigned and exercised, but they knew what I was saying, and I said, I do not wanna lose more than the max risk on the spreads, so by saying this, I was saying, hey, I'm triple checking and making sure that no matter what though, you better make sure that if I am gonna get assigned, you better assign and close out at the same exact time, because in this case, it's clear that they were slow, and that led to me walking away with 200 extra dollars, but if they were slow, and things went up really, really high now, and let's say it shot up before they could have confirmed it, I could have potentially lost more money, but you theoretically shouldn't have, that's why you email your broker, and I let them know, I said, I do not wanna lose more than the max spreads, and they said, hey, Josh, thanks for reaching out, we went ahead and exercised their 298,300 spy calls to cover your assignment, due to the exercise assignment of these options in your account, the balances may be off for the remainder of the weekend, everything should be corrected by market open on Monday, as this is a simple result, simply a result of trades settling out, keep in mind the trading restriction will be lifted overnight, and you'll be back to trading as you normally expect Monday, hope this helps, please write back, and there you go, so you could email your broker, but even they're saying, all of these numbers, and if you guys are seeing different portfolios, it's gonna get cleared up, if you sold the spread, and it was an equal one to one ratio, so like in these cases, we had the 298 assignment, the 299, we had pretty much, for every contract we got assigned on, we had something to exercise, we get assigned on one, we had another to exercise, so that equals out the ratio to make sure, that even though these are bigger dollar amounts, yes, even though you can get assigned, you should theoretically never lose more than the distance between the strike prices, which is the whole logic of the spreads in general, so at the end of the day, it helped us, you guys got to see, it's still a high probability strategy, these are the spreads, I encourage you, watch the spread videos we have on here, one is called Advanced Robinhood Trading Strategy, or you can just search, the Trading Fraternity Credit Spreads, and you'll find it, but know what you're buying, and understand now, the whole key to exercise an assignment, I want you guys to understand the difference, what is an assignment, what is getting exercised, and why do these even occur, because when you sell a credit spread, you're agreeing to give somebody shares, that you do not own, or you're agreeing to buy something, and then when you buy a contract, you own the right to it, so do you see how the logic, it's just a logical scenario, if I get assigned on this, I will therefore exercise this, so I will not lose more than this, simple as that, and I want you guys to really get that, and now if you understand, what you're doing with these contracts, these are the underlying functions, it's not that scary, so even though you have these balances, you don't need to trip out, you don't need to panic, enjoy your weekend, stay hydrated, stay safe, and I hope this helps you out, so let me know, comment below if this happened to you, did you end up making a loss or a win, and that's what I encourage you all to do, go through your transaction history, and get the calculator out, just like you saw, and do it, or maybe we'll go on stream, we'll talk about this pre-market on Monday, maybe even tomorrow, we'll see what the schedule's looking like, but I hope this helps, and I love you guys, and make sure you're ready to go on Monday, let's go!