Author Topic: Cancel the 2x collateral ASAP – The economic unsustainability of paying to sell  (Read 3866 times)

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Offline Ander

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Offline jamesc

Nobody forces you to pay interest for going short.

Interest is only demanded if there is an oversupply of shorters.

With an undersupply of shorters you can even enter a short position above the peg. Which kind of earns you an instant negative interest. Thereby compensating for the 2x collateral requirement.

I can see both points.  Guess is depends on what you want...  As a buyer: do you want an easier in and out of a tightly pegged negative interest rate asset or do you want to pay a higher buy-in spread?   Always nice to have a balance.  There is something to be said for negative interest rates.  For example, if I buy an index fund I expect to pay a very small fee for the service.

zerosum

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Nobody forces you to pay interest for going short.

Interest is only demanded if there is an oversupply of shorters.

With an undersupply of shorters you can even enter a short position above the peg. Which kind of earns you an instant negative interest. Thereby compensating for the 2x collateral requirement.

Exactly.
All sane market participants should short with 15-35-55-75%  to the peg....eventually. [i.e. the system is set up for 100+% discount to the peg at equilibrium.]

« Last Edit: December 14, 2014, 07:08:38 am by HRickover »

Offline Markus

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Nobody forces you to pay interest for going short.

Interest is only demanded if there is an oversupply of shorters.

With an undersupply of shorters you can even enter a short position above the peg. Which kind of earns you an instant negative interest. Thereby compensating for the 2x collateral requirement.

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 »

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 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)

Xeldal

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*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.

zerosum

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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!!!!!!!!!!!!!

Xeldal

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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

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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 »

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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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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I thought shorting was borrowing to sell?

Exactly

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

Xeldal

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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.