19 Comments
Jul 20, 2020Liked by Ranjan Roy

Hello, I'm contacting you on behalf of Citadel Securities, I work for their PR agency. The article inaccurately states that Robinhood routes orders to Citadel. Citadel is the hedge fund and Citadel Securities the market maker; they are two entirely separate entities. The references to Citadel should thus be Citadel Securities. Would it be possible to make the necessary corrections please? Feel free to contact me if you have any questions: eleonore.basle@greentarget.co.uk

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Jul 20, 2020Liked by Ranjan Roy

Ranjan, fascinating piece. Love how you get straight to the bone. You mentioned that Robinhood's secret sauce is their dopamine secreting UX/UI. Would love if you could dissect that in detail in one of your future posts.

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Jul 20, 2020Liked by Ranjan Roy

Ranjan, this was great. Your story-telling ability is incredible. Always look forward to receiving a Margins update.

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The $18,955 number is totally meaningless. To get it, the author just divides the total payment for order flow by the average account size. He fails to take into consideration the number of accounts at a particular broker. So let's say Robinhood doubles the number of similar accounts. Then payment for order flow would also double as would payments per dollar in the average account. Individual accounts haven't become more profitable as the author implies, there are just twice as many of them.

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And how do high frequency traders make money if they pay 18k to robinhood for 1 usd order that is routed to them?

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OK so the big question here is, how to profit on all these people making unwise option trades...

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Thanks, but it doesn't matter. What matters is Robinhood has made their app UI easy and basic, to ensure customers can process their orders fast while Robinhood makes money by scalping the price differences. Win-Win for both parties. I happen to know what I'm doing so I can take $5 and turn it into $5K in just a few days, no joke. I love Robinhood for that ;)

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I was writing about day trading for Salon in Atlanta during your Emory days. Just wrote up Robinhood for my current employer. Based on your piece I got it right

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Entertaining read. I do worry that retail investors are not schooled in how fast liquidity can change. I remember one speculative internet stock I was in back in 1999. I bought a pretty big slug at $8 and it went to $24 over the course of a few months. When I wanted out and went to sell I managed to get something like 1000 shares off but pushed it down from $24 to $16 and change. Then another 1000 shares at $8 and soon it was $2 on it's way to zero. Today I do trade some warrants that feel similar. They can double and triple but when you go to sell there is very limited depth in the market. As long as everyone is in "BTFD" mode they might get bailed out but even your stops won't protect you if things gap down. As a lifelong software analyst I read another buy rating yesterday on some SaaS name where the price target was "24x C2022 revenues" as if it makes sense to say "oh yeah I paid only 24x revenues for this money-losing business." Hello?

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"And trading options can be really exhilarating. It gives you much more of the casino rush than buying and holding stocks, or even buying and selling stocks"

Well said; Same is true for drugs, gambling, rash driving etc. I think education and self-thought is what helps going over the edge.

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Nice read, thanks for this article Ranjan. I am a novice in this field (, and a RH user!), and while I don't trade options or do day trading using RH, I do buy quite stocks and ETFs through Robinhood. And I don't think I quite understand how RH could make money off it...? Could I please suggest this as a topic for future article? That is, if I am buying 10 stocks of $MSFT for say $100, and sell it for $110 next year, I do get the $100 out of RH. So, where is RH making money?

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