> For example, picture a retail investor with a Robinhood account had sold call options in the amount of $100,000 and their account was worth $200,000. If the price gapped from 300 to 5000 and those options were exercised, that trader could have a loss of $10,000,000. He would lose the value of his account, $200,000… but the brokerage would have to make up the rest of the settlement and take a loss of $9,800,000. Now multiply that by thousands of accounts…. no brokerage wants to take the risk of being bankrupted, so they shut it down.
That's why every brokerage has a risk department. If you're a brokerage and you let thousands of customers write uncovered GME calls, you deserve to lose all your money and go out of business. Simple as that.
Brokerages do not have a fiduciary duty to prevent customers from losing their money in bad trades. It's one thing to shut down margin trading or even possibly options purchases, but to not allow people to buy a stock with their own money is pretty bad. There is zero risk to the brokerage there.
That's why every brokerage has a risk department. If you're a brokerage and you let thousands of customers write uncovered GME calls, you deserve to lose all your money and go out of business. Simple as that.