Free-quent Flyer
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Consider this another entry in my running saga of day trading with Robinhood.
As long as Robinhood has been around there's been language in their terms and conditions about margin accounts, which presumably is how they plan to make money in the long term.
They seem to have finally launched margin accounts in September, 2016, but I was only selected for so-called "Robinhood Gold" this week. Here's how it works.
Apparently like all margin accounts you're only able to borrow an amount equal to the cash value of your account.
But instead of charging you interest on the amount you borrow, you're charged a fixed fee which works out to 6% APR (5% APR for amounts above $50,000), but only when you borrow the maximum amount you're offered.
So for my (tiny balance) Robinhood account they want to charge me $10 per month for $2,000 in borrowing power. $120 over 12 months makes that a 6% APR loan (slightly less depending on how you want to calculate the compounding rate - daily/monthly/annually). You might be charged $30 on a $6,000 margin account (again working out to 6% APR).
As travel hackers will immediately recognize, this means the optimal amount to borrow is 100% of your allowed amount, since that minimizes the APR on the borrowed amount.
That means the question is, what exchange-traded securities do you buy with a 6% APR loan?
Robinhood obviously wants you to buy a bunch of stocks speculatively, but you don't have to buy what Robinhood wants to you buy. I frankly don't think there are very many exchange-traded securities worth buying at 4% APR, let alone 6% APR. But at some point in the next 0.5-6 years there's going to be a catastrophe in the markets, and the opportunity to buy more shares than you can, strictly speaking, afford is going to be extremely lucrative.
So bless Robinhood. I don't have any intention of upgrading my account to Robinhood Gold until that market catastrophe arrives, but as soon as it does I'll be buying 20-25% more shares than I can afford.
As long as Robinhood has been around there's been language in their terms and conditions about margin accounts, which presumably is how they plan to make money in the long term.
They seem to have finally launched margin accounts in September, 2016, but I was only selected for so-called "Robinhood Gold" this week. Here's how it works.
Apparently like all margin accounts you're only able to borrow an amount equal to the cash value of your account.
But instead of charging you interest on the amount you borrow, you're charged a fixed fee which works out to 6% APR (5% APR for amounts above $50,000), but only when you borrow the maximum amount you're offered.
So for my (tiny balance) Robinhood account they want to charge me $10 per month for $2,000 in borrowing power. $120 over 12 months makes that a 6% APR loan (slightly less depending on how you want to calculate the compounding rate - daily/monthly/annually). You might be charged $30 on a $6,000 margin account (again working out to 6% APR).
As travel hackers will immediately recognize, this means the optimal amount to borrow is 100% of your allowed amount, since that minimizes the APR on the borrowed amount.
That means the question is, what exchange-traded securities do you buy with a 6% APR loan?
Robinhood obviously wants you to buy a bunch of stocks speculatively, but you don't have to buy what Robinhood wants to you buy. I frankly don't think there are very many exchange-traded securities worth buying at 4% APR, let alone 6% APR. But at some point in the next 0.5-6 years there's going to be a catastrophe in the markets, and the opportunity to buy more shares than you can, strictly speaking, afford is going to be extremely lucrative.
So bless Robinhood. I don't have any intention of upgrading my account to Robinhood Gold until that market catastrophe arrives, but as soon as it does I'll be buying 20-25% more shares than I can afford.
