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This is a lot different though. Banks were the actual dealers of the securities in the big short- you were actually buying and selling to the bank itself. Robinhood and stock brokers, you aren't buying and selling to them- their primary function is to just give you access to the markets where market makers are participating on the other side of the deal. Robinhood does not participate in market making, they purely give you access to them.

In the Big Short case, the banks were acting as market makers, or more technically in this case dealers- this was more akin to going to a used car lot. You read a lot of reports saying that the new Fords were flying off the lots for outrageous prices, and to people with dubious ability to pay for the sticker prices they did because they got loans they shouldn't have. You go to the dealer and say I want to sell these cars short and buy them back later. The dealer presumably thinks you are an idiot, or wants to hedge some risk (the analogy is breaking down here), but says ok sure, thinking he is going to sell them for even more in 6 months. 6 months later comes- you were right- there is a flood of Fords on the market at half the price because so many people had them repossessed or are desperately trying to get out of these loans that are killing them. You go to the dealer and say "Ok bud, I'd like to buy these cars back at half price..." and they say "Nah, these are still worth 98% of what you sold for... how about that price?" and you are kind of stuck. You bought specific used cars that are kind of but not really entirely fungible. You can't just go down the street and buy those cars and replace them. You have to hope that they feel the pressure to lower those prices because they start feeling the squeeze for cash, or a regulatory agency comes in and puts the pressure on. They can kind of live in la-la land and avoid the reality of the situation as long as they have no requirement to sell.

Eventually though, they blinked and once one bank started taking write downs, all banks did, and once that became acceptable, they all followed suit- and they also needed the cash at that point.

Anyway- now back to stocks/options- these have well known discoverable prices and you can sell them on open markets where the brokers you connect to might be on the other end of the deal but its really unlikely. A broker/dealer like Robinhood or Schwab or Interactive Brokers should theoretically have an entirely flat position at the end of the day.

TL,DR: Robinhood didn't go down because it doesn't want you to sell your stocks.




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