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Offline mf-tzo

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Short Bitsud basics
« on: September 24, 2014, 09:24:43 PM »

I should know by now but I want to make clear a couple of things:

1. What is the short wall mean that I see on BTSX?

2. Back to basics with an example (sorry for flipping the market):

a) I buy from an exchange 10,000 @ 0.03 = -$300
b) I short $300 @ $0.03 so at some point I will have to repay $300 to cover (10,000 BTSX is held as collateral)

question: How much the BTSX value has to fall to have a margin call and lose all my collateral?

c) Assuming that BTSX increases vs. usd so now 1 BTSX = $0.06.
I buy from an exchange 5,000 BTSX @ 0.06 = -$300 to cover my $300 debt and my 10,000 collateral is released and I decide to sell them. My p&l is therefore -$300 -$300 + 10,000 x $0.06 = 0

So the question is. If from the beginning I believe that BTSX will increase and will be $0.06, why short in the first place and risk my collateral and not wait until it goes to $0.06 and sell them. If I do that:

I buy 10,000 @ 0.03 = -$300
I sell 10,000 @ 0.06 = +$600
My p&l is +$300

So basically why short bitusd in the first place? In theory since I am short and the price falls I win by buying back the collateral at lower price and pocketing the difference so I am pretty sure I made a mistake in my analysis but I just can't see it at the moment so please explain by replying to the specific example.

Moreover I understand that when I short, the system will ask for twice my collateral but I don't see that. If I short $300 @ 33.33 ($0.03) it will ask for 10,000 BTSX.

Apologies in advance but my head gets confused many times in my thoughts...
« Last Edit: September 24, 2014, 09:44:19 PM by mf-tzo »

Offline tonyk

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Re: Short Bitsud basics
« Reply #1 on: September 24, 2014, 09:30:15 PM »
I should know by now but I want to make clear a couple of things:
You should. :)

BTW, just posted something (semi) related that might be of interest to you https://bitsharestalk.org/index.php?topic=8390.msg120409#msg120409
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline mf-tzo

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Re: Short Bitsud basics
« Reply #2 on: September 24, 2014, 09:37:13 PM »
I read yours and I understand it.

I still don't understand the mistakes in my below example, so please take 5 min to explain in my specific example...

If the answer is that if nobody shorts bitusd there will be no bitusd and therefore no BTSX then fine...

Offline tonyk

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Re: Short Bitsud basics
« Reply #3 on: September 24, 2014, 09:40:10 PM »
I read yours and I understand it.

I still don't understand the mistakes in my below example, so please take 5 min to explain in my specific example...

If the answer is that if nobody shorts bitusd there will be no bitusd and therefore no BTSX then fine...

In the OP
1. will leave it to BM/A86 to explain...
2. I did not read the whole thing yet but :
-you cannot short BTSX

question: How much the BTSX value has to fall to have a margin call and lose all my collateral?

A lot and more importantly suddenly + some other conditions must be met like no sell orders (or some sell bitUSD orders but not for the whole amount needed) within 110% of the feed, at the time of the margin call .


for c) I think you are missing the proceeds from the short sell i.e. you actually receive BTSX when 'selling short' the same way as when you simply 'sell'.

Moreover I understand that when I short, the system will ask for twice my collateral but I don't see that. If I short $300 @ 33.33 ($0.03) it will ask for 10,000 BTSX.

The proceeds explained just above, make the second 100% for a total of 200%, they stay there until  the short position is closed (by you yourself, or by the system in the 'margin call' scenario.
« Last Edit: September 24, 2014, 09:54:16 PM by tonyk »
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.

Offline mf-tzo

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Re: Short Bitsud basics
« Reply #4 on: September 24, 2014, 09:45:55 PM »
Quote
you cannot short BTSX

Sorry you r right. I have edited my point b.. Thanks..Still the question remains...

Offline bytemaster

Re: Short Bitsud basics
« Reply #5 on: September 24, 2014, 09:47:11 PM »
Todays Price:  $0.03 per BTSX
You short $300 USD and post 10,000 collateral plus receive 10,000 collateral from the person who bought your $300 USD for a total of 20,000 collateral.
Tomorrows Price: $0.06 per BTSX
You take 5,000 BTSX and buy $300 USD
You take $300 USD and cover your short and get 20,000 BTSX.


Initial Condition: 15,000 BTSX worth $450
Final Condition: 20,000 BTSX worth $1200

If you had simply held... you would have $900 worth of BTSX so by shorting you earned an extra $300


For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline liondani

Re: Short Bitsud basics
« Reply #6 on: September 24, 2014, 10:16:04 PM »
Todays Price:  $0.03 per BTSX
You short $300 USD and post 10,000 collateral plus receive 10,000 collateral from the person who bought your $300 USD for a total of 20,000 collateral.
Tomorrows Price: $0.06 per BTSX
You take 5,000 BTSX and buy $300 USD
You take $300 USD and cover your short and get 20,000 BTSX.


Initial Condition: 15,000 BTSX worth $450
Final Condition: 20,000 BTSX worth $1200

If you had simply held... you would have $900 worth of BTSX so by shorting you earned an extra $300

If you had simply held you would have $600 worth of BTSX not $900   (10000x0.06=$600)
Profit: +$300

With shorting 15000x0.06= $900
Profit: +$600

Yes $300 more profit that means 100% more profit !!!
  https://bitshares.OPENLEDGER.info/?r=GREECE  | You are in Control | BUY | SELL | SHORT | SWAP | LOAN | TRADE |  

Offline mf-tzo

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Re: Short Bitsud basics
« Reply #7 on: September 24, 2014, 10:21:51 PM »
Quote
You short $300 USD and post 10,000 collateral


In order to post the 10,000 collateral I need to buy them first so day 1 I pay -$300 to an external exchange

Quote
plus receive 10,000 collateral from the person who bought your $300 USD for a total of 20,000 collateral.

I don't get that. Where do I receive the additional 10,000 BTSX? When the green button appears that says "cover" I receive 10,000 BTSX on my account automatically?

Quote
You take 5,000 BTSX and buy $300 USD

I take them from where? From the 10,000 that I received on my account as per above? or I have to buy them from the exchange?

Quote
You take $300 USD and cover your short and get 20,000 BTSX.

Why 20,000? I have used the 5,000 already as per above so I have 15,000 remaining.

Quote
Initial Condition: 15,000 BTSX worth $450

The initial condition is 10,000 @ 0.03 = -$300 which I can sell for 0.06 so pnl +$300

Quote
Final Condition: 20,000 BTSX worth $1200

The final condition is buy 10,000 @ 0.03  + sell 15,000 @ 0.06 = $900 so pnl is +$600

So by shorting I do earn an extra $300. Do I understand now correctly?

Do I understand correctly that when the green "cover" appears I receive on my account the 10,000 BTSX which I can do whatever I want and at some point I have to cover my debt so the remaining collateral is released as well?

And final question. What is the short wall on BTSX platform mean? Why only these short orders appear? how does this work? If it is 33 for example and I place a short order at 32.5 what happens?

Thank you very much for taking the time to explain BM. Much appreciated!!

Offline bytemaster

Re: Short Bitsud basics
« Reply #8 on: September 24, 2014, 10:50:34 PM »
Todays Price:  $0.03 per BTSX
You short $300 USD and post 10,000 collateral plus receive 10,000 collateral from the person who bought your $300 USD for a total of 20,000 collateral.
Tomorrows Price: $0.06 per BTSX
You take *ANOTHER* 5,000 BTSX and buy $300 USD
You take $300 USD and cover your short and get 20,000 BTSX.


Initial Condition: 15,000 BTSX worth $450
Final Condition: 20,000 BTSX worth $1200

If you had simply held... you would have $900 worth of BTSX so by shorting you earned an extra $300

If you had simply held you would have $600 worth of BTSX not $900   (10000x0.06=$600)
Profit: +$300

With shorting 15000x0.06= $900
Profit: +$600

Yes $300 more profit that means 100% more profit !!!

My numbers were right... look closer :)

For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline bytemaster

Re: Short Bitsud basics
« Reply #9 on: September 24, 2014, 10:53:21 PM »
Quote
I don't get that. Where do I receive the additional 10,000 BTSX? When the green button appears that says "cover" I receive 10,000 BTSX on my account automatically?

Short stands for "short sell" which means you are selling USD you don't currently own to someone and receiving BTSX in exchange. 

To sell USD you don't own you need to post BTSX collateral equal to the value of the USD you are selling to match the BTSX received by the other party.

So when you short you put up 10,000 BTSX and other buyer of BitUSD puts in 10,000 for a total of 20,000 BTSX that goes TO YOU when you buy back $300 BitUSD.
 
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

Offline mf-tzo

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Re: Short Bitsud basics
« Reply #10 on: September 24, 2014, 11:26:26 PM »
I can finally truly see the light now  :) :). Thank you very much for the detailed explanation and your time. I just realized now that I have missed again a very big opportunity to increase my shares by shorting when the client was released... But I guess a lot of people have not yet truly understood all that either so I am pretty sure we still have a long way to go...

Now my only questions relate to margin call:

1. What does the shorting wall imply?

2. I have placed a short order at the bid price but is not completed. Why? does this has to do with the short wall?

3. Margin calls are initiated when my shorting price is 150% away from the first bid price?

Once again thank you very much!!

 

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