If you buy a share of GME from Citadel Securities, that may typically result in an immediate unhedged short position at Citadel, if they weren't already holding it.

Normally, a market maker might then close it by buying a share from someone trying to sell. But in a massively one-way market like GME, it's quite likely that they build up a large enough unhedged massive short position that they say "no, we're not taking on any more risk" and communicate that to Robin Hood.

They immediately hedge it. If the market for GME is "one-way" (it's not, people are shorting), they might also hedge the sale by buying more exotic financial instruments and correlates of the GME price.

> they say "no, we're not taking on any more risk" and communicate that to Robin Hood.

Maybe, although they would probably do that when their ability to hedge started breaking down, not when they'd already acquired massive short positions.

More likely, to me, is that they would just increase the bid-ask price spread continuously as their ability to hedge degrades.

> They immediately hedge it

This assumes continuous liquidity. Dangerous assumption to make in choppy markets.

It is not uncommon for markets to gap up or down discontinuously. You look at the market and see bid 899 at 901, buy some shares for 898, offer them at 890 and find the market is now 125 at 901.