Thoughts on Citadel / Robinhood (looking for feedback):

Citadel is the biggest market maker for Robinhood. They pay for the customer trades and act as a maker maker. They have the right of first refusal on taking the other side of those trades.

IF, they took the other side of a lot of those options trades last week, the week prior, etc. before this massive move higher...the market maker (Citadel) was unlikely to hedge (delta/gamma hedging needs to be continuous)

Delta hedging is imperfect and if a stock goes parabolic, the market maker is the bagholder.

So IF Citadel, and/or the other market makers were unable to maintain their hedges, they WOULD want/require the stock to get smoked before expiration.

Thus, as one of the largest clients to IBKR and RH, they tell those businesses to “shut it down” and stop the buying. By stopping the demand for new buy orders, there is only one way for the stock to move (down).

Citadel likely bought a stake in Melvin because they hoped that the infusion of capital would stop the “run on the bank” and their position as a market maker caught over their skis wouldn’t be known.

Then they forced Melvin to cover the shorts and tell the public they did so, again, hoping to end the squeeze and save themselves. They (Citadel) NEEDED to end it by Friday because that’s when the options expired and they would have been shown as holding the bag.

It’s definitely possible that this could be incorrect. Just sharing some sourced thoughts. Looking for feedback.

Again, “free” trades aren’t free if they go through Citadel. This was a KNOWN risk. And it shouldn’t be surprising to see increased margin requirements and restrictions as this spiraled out of control.