The “why” is fairly easy to explain. However, the insiders dont want the system fixed as it is seen as being easy money. This was caused by a financial system that allows the selling of unsecured aka “naked” shorts.
The fix is simple, when selling a future or options contract, the proceeds from that sale must be held in reserve against the future closing of that position. Should the position turn negative, then the position must be covered at the close of the day. Covering that position can be done by:
- adding cash to the reserve
- adding the underlying commodity to the reserve
- covering with another option (similar to a straddle)
That way, when the option/contract comes due, there can not be a short squeeze as all option positions are covered.
So how is that different than what is done today, i.e. a required margin deposit?