Write your search in the input below and press enter.
Esc to close.
WSJ: More Men Are Addicted to the ‘Crack Cocaine’ of the Stock Market
By Gunjan Banerji
The Wall Street Journal
The following is an excerpt from the full article, which can be found here.
A new type of addict is showing up at Gamblers Anonymous meetings across the country: investors hooked on the market’s riskiest trades…
A spiking problem
Pennsylvania’s gambling hotline has fielded more calls tied to gambling in stocks and crypto since 2021 than it did in the prior six years combined. At a New York-based treatment center, Safe Foundation, clinical director Jessica Steinmetz estimates about 10% of patients are seeking help for addictions tied to trading. Before 2020, there were no such patients.
Lyndon Aguiar, a clinical director at Williamsville Wellness, a gambling treatment center in Hanover, Va., said counselors sit down with traders and delete dozens of stock, sports and financial news apps from their phones when they walk in the doors for its inpatient treatment program. The center has seen a 25% increase in gambling tied to markets since 2020, compared with the prior four years.
Patients might install Gamban, an app that locks individuals out of gambling on their phones. The app started blocking Robinhood and Webull in July 2021.
A Robinhood spokesperson said it includes “robust safeguards to help customers make informed decisions” and that individuals deserve the freedom to become stewards of their own finances. A spokesperson for Webull said the platform offers educational tools to foster responsible investment decisions.
New patients often suffer from withdrawal symptoms including severe anxiety and depression when they first stop trading, he said. Some start fidgeting or repeatedly tapping their fingers against a table, itching to place a trade.
Abdullah Mahmood, administrative coordinator of a gambling program at the Maryhaven addiction treatment center in Columbus, Ohio, said he has seen several clients enter the treatment center’s doors this year for trading addictions. Options are particularly problematic, he said.
Activity in options is on track to smash another record this year. Trading in contracts expiring the same day, which are the riskiest, has soared to make up more than half of all trades in the market for S&P 500 index options this year, according to figures from SpotGamma. These trades are more electric than traditional stocks, with the potential to rocket higher or plunge to zero within minutes.
Similar to wagering on how many points Mavericks point guard Luka Dončić will score in the first quarter of an NBA game, traders are increasingly using options to speculate how stocks will fare during the trading session, rather than at the closing bell.
This year, “a client came down to my office, suicidal,” Mahmood said. “He had lost $14,000 in just five minutes in options trading on the app Robinhood.”
The rise of apps
Doug Royer, 61, has been attending Mahmood’s group counseling sessions every Monday.
He initially entered the center’s doors for help with his drinking. Then, he saw signs for a gambling program while walking the halls of Maryhaven’s treatment center. Immediately, the six figures he lost trading came to mind.
After selling his house in 2022, he had poured thousands of dollars into investments like the Grayscale Bitcoin Trust, Lockheed Martin and Texas Pacific Land before amping up the risk with options trading. He traded in and out of companies such as Spirit Airlines and Estée Lauder, while borrowing on margin in an attempt to magnify his bets, brokerage statements show.
Eventually, he said he had almost no money left to trade with after losses in options and lotteries. He said he has been working part-time as a massage therapist near Columbus, Ohio.
“It’s very easy to make a lot of money,” Royer said. “It’s also easy to lose everything really fast.”
Addiction counselors say gambling in financial markets often goes undetected and can be tough to track because individuals confuse their actions with investing. Unlike sports betting apps such as FanDuel and DraftKings, most brokerage apps don’t post warnings about gambling or offer hotlines to seek help.
The proliferation of financial instruments, along with flashy brokerage apps that make them easy to trade, has also helped some gamblers convince themselves that they weren’t actually placing bets.
The National Council on Problem Gambling started including questions about investing in its annual survey in 2021, after its gambling hotline received an influx of calls during the meme-stock mania. The council’s executive director, Keith Whyte, said NCPG reached out to apps like Robinhood to suggest they adopt consumer protections ingrained in gambling apps.
“In some cases, the consumer protections in the gambling industry exceed that in the financial markets,” Whyte said.