Robinhood: Bug in Trading, the App allows unlimited Leverage

A Bug in the Trading App Robinhood allows users to open, with a low equity ratio disproportionately large trading positions. Specifically, it is the Premium version of the App, Robinhood Gold, which allows users to operate with borrowed money, derivatives trading. On Reddit, the Glitch was baptized "Infinite Money Cheat Code".

By Christopher clover
6. November 2019BTC $ 8,780.97 , and 0.68%part Facebook Twitter LinkedIn xing mail

The Problem: Resourceful traders have found a way to bypass the risk management of the Trading App and were able to share with de facto unlimited Leverage to act. Apparently, Robinhood has expected in these cases, the value of Call positions to the investment capital of the users. As a result, these larger and larger positions could open up and repeat the process. In the online forum Reddit, users share their experience with the Exploit, the Community "Infinite Money Cheat Code" baptized.

A Reddit user describes his approach thus:

I made a Deposit of US $ 2,000 (the Minimum for access to the Gold Trading required), and then I bought 100 shares of AMD for about 3,800, with Margin. Then I sold a AMD Call Contract with a $ 2 Strike Price, almost my whole money back [...]. Then I use this money to buy two hundred shares of AMD remember that the Margin doubled my purchasing power, then I sell 2 Call Contracts with the same exercise price of US $ 2, almost all of my money back, which is then doubled thanks to the Margin of Robinhood again. I repeat this until my personal risk tolerance has been exhausted. At the Moment, I'm Leverage at 25 x, because I had US $ 2,000 in instant deposits. I then use my increased purchasing power to maximize my profits.

The "Infinite Money Cheat Code" for Robinhood

In this way, the user enlarged its supposed purchasing power of over US $ 50,000. This, he continued to buy Put options on Apple shares. He speculated that the price of the Apple stock after the release of financial results on 30. October would fall. It is not good enough – within a few seconds after the start of trading, the Trader has made from his initial Investment of 2,000 dollars of debt in the amount of approximately $ 50,000. The Redditor with the user name control, then arrative has it brought through the publication of relevant Videos become dubious glory:

wsb yolo

watch This Video on YouTube.

another user reported the Bug a Leverage of 500 x achieved. With an Investment of 3,000 dollars, he was able to open in this way, a Long Position in AMD shares in the amount of $ 1.7 million.

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so Far it is still unclear whether and what are the consequences of the Glitch brings. Compared with the U.S. news service Bloomberg, the lawyer, Donald Langevoort of the Georgetown University any warns free riders could occur before the Exploit of the bug:

If there is an Element of deception that they have achieved this by exploiting a vulnerability in a System, I can see how the fraud to a securities case.

to Who, so the lawyer further, the error of another for self-enrichment advantage, has expected to pay it back.

Robinhood has, meanwhile, announced, in personal contact with the affected traders to. The California-based FinTech company, which also offers crypto Trading, was able to gather in July in an investment round of 323 million US dollars.

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