Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

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pcsrini
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Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by pcsrini » Sun Jun 28, 2020 11:32 pm

https://www.forbes.com/advisor/investin ... upt-hertz/

The article talks about frictionless, no commision trading and the gamification of stock buying in the Robinhood mobile app. Anonymized data on its users stock holdings are provided by Robinhood to third party sites which then track ownership over time. I am not aware of other brokerages selling users stock holding data to third parties. It's probably a source of revenue for Robinhood. Robinhood primarily makes money by receiving compensation for "payments for order flow", routing orders to third parties for execution.

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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by Stinky » Mon Jun 29, 2020 4:40 am

pcsrini wrote:
Sun Jun 28, 2020 11:32 pm
https://www.forbes.com/advisor/investin ... upt-hertz/

The article talks about frictionless, no commision trading and the gamification of stock buying in the Robinhood mobile app. Anonymized data on its users stock holdings are provided by Robinhood to third party sites which then track ownership over time. I am not aware of other brokerages selling users stock holding data to third parties. It's probably a source of revenue for Robinhood. Robinhood primarily makes money by receiving compensation for "payments for order flow", routing orders to third parties for execution.
If stocks have a significant decline in the near future, stories like the Hertz price run-up may be cited as a “leading indicator” pointing to a bubble in equities. Frenzied trading by less-than-knowledgeable folks in a security that is likely worthless.

Kind of like getting stock tips from the shoeshine boy in the 1920s.
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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by btq96r » Mon Jun 29, 2020 6:03 am

I'd love to see the demographics of who was buying, and to what degree of their net worth.

Generally, I'm a favor of letting those who want to play stupid games win stupid prizes, and giving Darwin a chance to up his batting average. However, with algos buying stocks now, their Leroy Jenkins style of investing could cause a larger problem if the machine follows along for the ride. I think it's worth considering if buy/sell of a stock should be paused once a company announces they've filed for bankruptcy.
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stormcrow
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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by stormcrow » Mon Jun 29, 2020 7:20 am

While the article is interesting, without knowing the volume that the "retail" investors were trading it is largely useless. If those new purchasers were only picking up one or two shares on a whim because they saw in on a list or in the news, that would hardly be enough to cause the level of pump that Hertz experienced.

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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by firebirdparts » Mon Jun 29, 2020 7:49 am

HTZ post-bankruptcy is mostly like bitcoin, but it's a whole lot cheaper, and they had regular options too.
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pcsrini
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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by pcsrini » Mon Jun 29, 2020 11:31 am

A comparison of the payments from third parties for trades directed to them from broker platforms. It’s not clear from the article why Robinhood is able to charge a higher payment per transaction compared to the other brokers.
https://apple.news/A25ocN2vrTheRdcQtwEHbrA

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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by afan » Mon Jun 29, 2020 8:20 pm

Day trading is crazy. That said, someone who wants to ride volatile stocks up needs to buy, or short, these stocks. Some investors probably did buy HertZ when it was near zero and sell when the price skyrocketed. Like a game of musical chairs. There may be a lot of losses but all those shares that traded at these absurdly high prices were sold by someone. Some were sold by people who bought low. Others may have been sold by long term holders who saw a chance to get out with less loss.

I am all for liquidity.
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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by petulant » Mon Jun 29, 2020 9:34 pm

btq96r wrote:
Mon Jun 29, 2020 6:03 am
I'd love to see the demographics of who was buying, and to what degree of their net worth.

Generally, I'm a favor of letting those who want to play stupid games win stupid prizes, and giving Darwin a chance to up his batting average. However, with algos buying stocks now, their Leroy Jenkins style of investing could cause a larger problem if the machine follows along for the ride. I think it's worth considering if buy/sell of a stock should be paused once a company announces they've filed for bankruptcy.
Never expected to see Leeroy Jenkins come up on BH

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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by whodidntante » Mon Jun 29, 2020 10:25 pm

pcsrini wrote:
Mon Jun 29, 2020 11:31 am
A comparison of the payments from third parties for trades directed to them from broker platforms. It’s not clear from the article why Robinhood is able to charge a higher payment per transaction compared to the other brokers.
https://apple.news/A25ocN2vrTheRdcQtwEHbrA
I would imagine Robinhood is the small order king. Maybe small orders are worth a premium.

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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by Fortune Seeker » Tue Jun 30, 2020 1:35 am

Perhaps it's because hedge funds want order flow from people who are day trading various stocks and options based on "news" or social media noise, not investors that systematically contribute monthly into broad index funds and don't sell until they retire.

I find it amusing how governments around the world are banning "lootboxes" and "predatory monetization" in videogames, but 18-yr olds tossing their college money at Hertz options is fine because it's "investing".

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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by btq96r » Tue Jun 30, 2020 7:33 am

petulant wrote:
Mon Jun 29, 2020 9:34 pm

Never expected to see Leeroy Jenkins come up on BH
Pretty easy to see Leroy as a day trader. :D
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pcsrini
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Re: Forbes: Robinhood & Hertz: The Troubling Saga Of A Bankrupt Stock

Post by pcsrini » Tue Jun 30, 2020 11:10 am

Fortune Seeker wrote:
Tue Jun 30, 2020 1:35 am
Perhaps it's because hedge funds want order flow from people who are day trading various stocks and options based on "news" or social media noise, not investors that systematically contribute monthly into broad index funds and don't sell until they retire.

I find it amusing how governments around the world are banning "lootboxes" and "predatory monetization" in videogames, but 18-yr olds tossing their college money at Hertz options is fine because it's "investing".
Yes, it appears the smaller order size from a retail investor is less risky for market makers. So Robinhood has the upper hand and is able to negotiate higher payments from these third parties. Here is a bit more of an explanation:

https://blockworksgroup.io/blog/robinho ... hat-matter

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