Re:Robinhood is said to draw on bank credit lines amid tumult
by arcticbull on Thursday January 28, 2021 @07:18PM
(#25951616)
What do you plan to do about the options folks are holding?
When you buy a call option from a market maker, they buy shares to cover the delta. When the delta changes, they need to adjust their shares to avoid exposure. Certainly a large part of the price action here is a gamma squeeze, where WSB folks buy tons of OTM calls, which Citadel buys shares to cover, which pushes the price up, which in turn requires them to buy more.
Should they no longer be able to buy or sell options to ensure the solvency of their sellers?
I mean, it's totally reasonable to tell them they shouldn't have taken on that level of risk haha.
When you buy a call option from a market maker, they buy shares to cover the delta. When the delta changes, they need to adjust their shares to avoid exposure. Certainly a large part of the price action here is a gamma squeeze, where WSB folks buy tons of OTM calls, which Citadel buys shares to cover, which pushes the price up, which in turn requires them to buy more.
Should they no longer be able to buy or sell options to ensure the solvency of their sellers?
I mean, it's totally reasonable to tell them they shouldn't have taken on that level of risk haha.