I actually find that explanation not very helpful and only broadly right (in the sense that he used premiums from writing call options to lever up even more). Almost everything else is wrong, tbh.

Some important aspects:

* CTN isn't holding cash, he's holding $F stock and offsetting ITM call options. * The leverage he's getting isn't on a linear payoff. That is, it's not like I get a $1M loan on a $4k collateral. His position is more conplex and his payoff profile is nonlinear. I describe that more here: https://news.ycombinator.com/item?id=21457524

It's funny, and it's most likely wrong for RH to allow him to put on that position (in the unlikely event $F craters, RH is on the hook for _a lot_ of money).

But it's not as simple as explained in that reddit post.

What the hell was this guys APPL position, and why did he not know what would happen long before market open?

He bought 50k of Out of The Money PUTs expiring next day. So he bet AAPL would go down. When market opened AAPL went up and his 50k options would expire worthless at the end of day.

To get the leveraged money he bought stock and sold CALLs against it. RH has a bug where they give you credit for the premium collected instead of reducing buying power.

Word on Reddit he had done this before and understood what was happening just fine but did this to make a point. There are specific processes to get the leverage that high and he was allegedly able to handle it. See a comment higher up in this thread.

Also he picked his position because he thought apple was overvalued due to having too many female execs. Even if we concede his point, that should be priced into the stock already, no?

It may be priced in the stock if other traders have the same logic.

If you think it's a good investment thesis, a better strategy would be to build a portfolio where you go long on a basket of stocks with "not too many female execs" and another, offsetting, short basket of stocks with "too many female execs". If you do that properly, you should be able to almost entirely eliminate market and industry risk and basically "amplify" your investment thesis.

This is what a hedge fund originally was (now usually referred to as long short equity funds). Relative value trading. A lost art in our current central bank driven markets.

"Next he goes to the local stables. After watching horses mount each other for a while, he buys a thoroughbred foal for $20k. At Bible study that night he meets someone willing to pay him $19k for breeding rights to the horse as an adult."

Bear in mind that an ELI5 constitutes an advanced level of understanding on r/wallstreetbets.

r/wallstreetbets is consistently one of the highest quality subreddits when it comes to pants-shittingly stupid decisions paying off for the group (in terms of comedy, not actual money or wise investments).

For strict entertainment value, I rank it higher than any other site on the net.

They're really everything great and terrible about the internet and investing. I love it.

I think part of what makes it so hilarious is the real-life effects. Other communities might have inside jokes but on WSB they're references to times people committed financially insane actions with real consequences. There's not only hilarity, but a morbid curiosity that makes me laugh and gasp at the same time.

But there are also the situations where some concave skulled moron manages to be so stupid, it actually costs a company like Robinhood and WSB comes out on top (see - 1R0NYMAN)

I think 1RONYMAN is smarter than a lot of the people that laugh at him. Terrible judgement. But intelligent.

Well that would just be another one of the real-life consequences, good or bad, for either party involved.