[turc1656]

That's somewhat correct. But it wasn't that they didn't allow those people to sell. In the film they were dealing with specialty derivative products that weren't traded by your average person. The derivative products in the film were sort of like bond pricing where price discovery isn't obvious and determining a fair price is a bit subjective since the volume was very low. So when people like Michael Burry (Bale's character) called to see what kind of price they could get, the banks would give him a bullshit, obnoxiously low offer price they'd be willing to give him because correctly valuing these derivatives would bankrupt the banks. So they held them on the books with fake valuations to stay afloat while they reduced their risk. Then, after doing all that they could fairly price them, which is when Burry makes a metric shit ton of money basically overnight - because he is finally able to get a fair price.

For example, if we took a simpler example of something more people are familiar with like options...let's say you buy a put at a strike of 100. The stock is trading right around 100. The market tanks like it has been doing and the stock goes down to 80. That's great for you since you had the put. You technically have the right to buy the shares at the market and shove them onto someone and force them to pay you 100. Most of the time, since we're dealing with derivatives, they just trade the value of the option itself and skip dealing with the underlying security because it takes a lot of capital (100 shares * 80 bucks each in this case). So the value of the option (the derivative) should be around $20 as you approach expiration and the premium fades off. If the market maker for the options has way too much exposure and wrote naked puts (meaning they didn't have the underlying security) they took on a ton of risk and basically got fucked. In this scenario it's like Burry calling and finding out his options are worth like $1.50 instead of $20 simply because they are thinly traded and therefore can't get a good price by anyone. This actually happens on some options - you'll see a huge spread between the bid and ask on some options so it's not like it doesn't happen even for this type of retail-friendly derivative.

[globuous]

Thanks for the clarification, very well explained ;)