Re:Robinhood denies claims that it sold GameStop shares out ...
by PhantomGremlin on Friday January 29, 2021 @11:54PM
(#25966229)
The role of option writers is very much an under-reported part of this whole fiasco.
Normally you want option writers to be able to provide liquidity by going naked short when selling calls. Obviously that fails when involving small companies with high short interest and hordes of "4chan found a Bloomberg Terminal" investors.
I looked a little at GME during the week and I saw that the option market makers had significantly reduced their participation. I bet that they're also big losers. But that's what they do for a living, it's their own fault if they blew up selling calls naked. They knew the risks. Delta hedging doesn't work when a stock can move 100% in a single day.
Normally you want option writers to be able to provide liquidity by going naked short when selling calls. Obviously that fails when involving small companies with high short interest and hordes of "4chan found a Bloomberg Terminal" investors.
I looked a little at GME during the week and I saw that the option market makers had significantly reduced their participation. I bet that they're also big losers. But that's what they do for a living, it's their own fault if they blew up selling calls naked. They knew the risks. Delta hedging doesn't work when a stock can move 100% in a single day.