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zerosum

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Cancel the 2x collateral ASAP – The economic unsustainability of paying to selling put options.

The problem can be explained in several ways. I chose this, as the more clear way to explain the issue. I will try other ways if this does not go through…

V 1.0


A short position is buying a call and selling a put option. When you require 2x collateral, you have - buy 1x call and sell 1x put + 1x collateral. Everything above 1x collateral is fine and good … BUT you just cannot expect the person providing the loan to also offer interest for that privilege…  In other words at 2x collateral (anything above 1x, for that matter) should receive not pay interest! *

The system can work (and barely at that, but still by very screwed-up economic logic [i.e. relying on bitUSD holders to be stupid]) only in strong uptrend of BTS.

 
* The time constrain -rebuying the position each month – btw, turned this extra collateral in full blown  ‘sell/short put position’, which only means that such seller expects not only interest but also a full risk premium...



« Last Edit: December 14, 2014, 03:29:59 AM by tonyk2 »

Offline Mysto

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I agree with this.  +5%
It doesn't make sense that they have to pay interest.
« Last Edit: December 14, 2014, 02:27:50 AM by Mysto »

Offline Riverhead

I thought shorting was borrowing to sell?

Offline bytemaster


I thought shorting was borrowing to sell?

Exactly
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Offline Xeldal


A short position is buying a call and selling a put option.

I believe that's backwards
A synthetic Short = selling 1 call (ATM) and buying 1 put (ATM).

Quote
BUT you just cannot expect the person providing the loan to also offer interest for that privilege…
The short is borrowing to sell bitUSD and should be paying interest for the privilege.



zerosum

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I thought shorting was borrowing to sell?

Exactly

I would think it over.... Right now it is loaning and paying interest to do so....

zerosum

  • Guest

A short position is buying a call and selling a put option.

I believe that's backwards
A synthetic Short = selling 1 call (ATM) and buying 1 put (ATM).

Yes, but it is short bitUSD (aka long BTS) so it is the opposite.

zerosum

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V 2.00
Hopefully more understandable than var #1

I offer interest to the privilege to  win 50% and loose 100%


... hope this helps.
« Last Edit: December 14, 2014, 03:29:32 AM by tonyk2 »

zerosum

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V 3.00

I thought shorting was borrowing to sell?

It is indeed borrowing up to a point. If 1USD=1EUR and you provide 0.5 EUR to borrow 1 dollar it seems like a loan. But if you provide 2 EUR to borrow 1USD (while your EUR is free to sell on the open market) it starts to look like screwed up loan, scratch that, you are the one loaning not borrowing....
« Last Edit: December 14, 2014, 03:29:07 AM by tonyk2 »

Offline Xeldal


OK Variant 2
Hopefully more understandable than var #1

I offer interest to the privilege to  win 50% and loose 100%


... hope this helps.

You are borrowing BTS for leverage.  the scenario for losing is when BTS loses some% . so even if you hadn't made the short. You lose some% and because you decided to take leverage you lose more.   

For the privilege of borrowing more BTS for leverage, you pay interest.

If you want more BTS and you don't want to pay interest,  Buy more BTS with CASH.  If you don't have any more CASH and you want more BTS you can borrow more BTS but you have to pay interest, and risk margin call.

zerosum

  • Guest

OK Variant 2
Hopefully more understandable than var #1

I offer interest to the privilege to  win 50% and loose 100%


... hope this helps.

You are borrowing BTS for leverage *.  the scenario for losing is when BTS loses some% . so even if you hadn't made the short. You lose some% and because you decided to take leverage you lose more.   

For the privilege of borrowing more BTS for leverage, you pay interest.

If you want more BTS and you don't want to pay interest,  Buy more BTS with CASH.  If you don't have any more CASH and you want more BTS you can borrow more BTS but you have to pay interest, and risk margin call.

Exactly!

*You are not borrowing BTS, you are lending them!!!!!!!!!!!!!

Offline Xeldal

*You are not borrowing BTS, you are lending them!!!!!!!!!!!!!

No. I think you are borrowing bitUSD to sell for BTS

Not really borrowing or lending BTS technically.

Borrowing BTS in the sense that you have to give them back after 30 days I guess.

Offline xeroc

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No. I think you are borrowing bitUSD to sell for BTS
This!
Quote
Not really borrowing or lending BTS technically.
Technically borrowing USD from the network (when shorting)
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zerosum

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No. I think you are borrowing bitUSD to sell for BTS
This!
Quote
Not really borrowing or lending BTS technically.
Technically borrowing USD from the network (when shorting)

You are both smarter than that. Read my response to Riverhead...i.e. as to why/when  borrowing becomes lending.

Offline eagleeye

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Bytemaster Dan there is an opportunity here much like how Xeldal outlined to make "calls" "puts" and "borrowing for shorting."  2 types of assets.  If you made calls and puts it would dramatically increase the supply of BTS as you are using leverage.

The unstable game of leverage is what we may have to play.

Think about how you can incorporate "calls" "puts" not just "borrowing" and "lending" so that it increases usability.  You may be able to find the term to use as you want it contractless contracts which as you have been pragmatic, you may have to give up.

IMHO I dont believe Bonds will fair as well as Stocks when you get there.  We just need the feeds and when I mean feeds I do not mean delegates which we will need as well but I mean the reflection of the asset in the market being pegged as bitsapphire outlined in another post.

Also make unofficial assets but that have to be authorized by 51 delegates (ofcourse) (I dont know if this is up right now) but it would be very good and dramatically increase BTS, it just matters that accountability of those assets and would dramatically increase the scope of Bitshares.
« Last Edit: December 14, 2014, 06:54:06 AM by eagleeye »

 

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