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options option-strategies option-exercise

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June 16, 2025 Score: 1 Rep: 9,771 Quality: Low Completeness: 50%

Here's a YouTube video that explains it in detail: https://www.youtube.com/watch?v=3zW86yXg7RM

From a Reddit thread

1R0NYMAN discovered that Robinhood's risk management was complete garbage in that it let him use components of what's called a short box spread as credit to be able to balance the 'debit' halves of the spread without borrowing money, because the position is naturally hedged against itself. Using this he was able to obtain positions on about $250,000 using $5000 of his own money. Naturally this position was taken on UVXY which itself is a leveraged derivative instrument, not a real stock of an actual company, and the original poster referred to it as "risk free".

This all changed when it started to fall apart and Robinhood forcibly liquidated the spread but not before 1R0NYMAN withdrew $10,000 leaving RH $58k in the hole. Robinhood banned the strategy on their app almost immediately.

Based on comments in a different Reddit thread, he got assigned early on long-dated (2 year expiry) deep in-the-money (strikes were 10 and 15, underlying was trading at ~65 at the time) options on UVXY, a leveraged ETF on VIX futures that can be quite volatile itself.