High-Flying Trading App Robinhood Goes Down at the Wrong Time
“This is a huge black eye for them and they really need to do something to earn back the trust of their clients,” said Ben Carlson, the director of institutional asset management at Ritholtz Wealth Management in New York and the author of the blog, A Wealth of Common Sense. “I can’t recall another time when an entire platform was down all day like this.”
During the market turbulence, other trading firms that cater to small investors have also experienced difficulties. The website for mutual fund giant Vanguard experienced “sporadic unavailability” on Friday because of heavy trading volumes, a spokesman said. TD Ameritrade also said trade confirmations were slow to process on Friday.
But none were down as long as Robinhood, which has made it particularly easy to buy and sell not only traditional stocks, but also riskier investment products like cryptocurrencies and options, a contract that makes it possible to bet on stocks going up or down.
Many Robinhood customers nursing losses on Monday, when markets rose, had purchased options contracts to bet that the markets would fall. When markets instead surged, they were unable to get out of the contracts because the app was down.
Taylor Dalton, 29, said he had recently decided to invest roughly $8,000 in stocks and option contracts through Robinhood, including “put” contracts on airline stocks, which would give him the opportunity to profit if their shares declined.
“Yesterday, I had plans to close out all of my options and take a profit,” said Mr. Dalton, who co-owns a cupcake and coffee bar franchise. “Now I am in the red,” he added, referring to his gains that have been erased, “and I am not sure what to do.”
As for Robinhood, he said, “I am definitely never using them again.”
Nathaniel Popper reported from San Francisco and Tara Siegel Bernard from New York.