Robinhood user exploiting margin loophole to turn $4k into $1M position

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If I understand it correctly, the user bought stock in a company (in this case $F) and then sold deep in the money call options, which is returned to your account as cash which is being mistakenly calculated as additional buying power. He then used the additional cash to buy more stock, and repeated the cycle to get to $1M.

This is a massive accounting issue on RH’s part and almost certainly breaks FINRA rules for margin trading.

> which is returned to your account as cash which is being mistakenly calculated as additional buying power

Almost, but that's not exactly the issue. In fact, the issue is probably worse. If you write those calls, you definitely get actual, real cash for them. So that's not the problem. But if you wrote deep ITM calls (as is the case here), your stock on the other hand is virtually gone. So the issue is that they compute an incorrect value for the resulting portfolio (you can see it in the screenshot, where it says "$3,999.88 portfolio"; that is definitely wrong). The cash part is correct; to some extent the stock part is correct too, but if you add the outstanding calls in the mix, the portfolio value is in fact pretty much just the cash (plus a small premium).

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