The recent suicide of a Robinhood investor who racked up $730,000 in trading losses begs the question of whether investing apps have a fiduciary duty to qualify investors for more complex financial instruments. It can make people feel savvy and sophisticated to say that you have put options in Tesla, however, a lack of understanding of the risks or even how to mitigate your risks—instead of leveraging further—can result in the financial destruction of your life. But how do you know if you’re a shrewd investor or a high stakes gambler?

@afisher recently shared an analysis of the Robinhood app traders who were betting big on Pandemic bankrupted companies such as Hertz. Do you think with high unemployment that we’ll see more people “betting the farm” on high risk investments to try to keep what they have?

Further Reading

Alan Fisher’s discussion on high volume trading of the stocks of companies in Bankruptcy

<><><>

Robinhood increases guardrails on options trading in the wake of a customer suicideRobinhood is making it more difficult to get access to its options offering in the wake of a customer's suicide last week.www.cnbc.com

<><><>

I don't know if they have a fiduciary responsibility, per se, but I do think they have a moral obligation to help folks, especially newbie investors, understand the potential consequences of their actions.

Retirement planners have used simulation software for years to show non-investors how saving modestly and regularly today can yield impressive results in retirement. Similarly, I think these platforms can illustrate graphically, or simulate if you prefer, the potential outcomes of just about any trade. Not just option trading, but more mundane margin trading as well.

It's just software and a dynamically generated chart, graph or probability distribution could easily convey a lot of information.

Part of the problem for retail investors is the large volume of market activity in a stock that can be represented by "shorting" trades.

A large proportion of shorting trades in any given stock can give rise to the counter-intuitive effect that good news can cause a stock to fall in value, and vice versa, as short trades have to be unwound.

For retail investors that either do not know this, or who have no way of knowing whether a stock has a build up of short trades, this could be a very problematic situation.

For options trading this effect is, if anything, multiplied.