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Offline bytemaster

Max Short Holding Period
« on: September 30, 2014, 07:10:41 PM »

When your short order is executed you will be given 30 days until a mandatory cover (without fee) is executed.

This is done to enhance the Nash Equilibrium that will cause shorts to take opportunities to cover at a profit anytime there is deviation from the peg.  After 30 days this will create continual buying pressure on BitUSD.  This will reduce the demand for shorts that are only "long-term" bullish and cause them to be more "medium term" speculators.   If you want to go "long term short" then you will have to cover and re-short monthly.   You maximize your profits by covering and re-shorting when there is the greatest deviation from the peg.

This is in line with traditional financial instruments such as futures contracts that always have a maturity date.   

Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.   

This also provides liquidity from shorts that have lost their keys and are unable to cover and forces shorts that are losing ground to "re-up" their collateral. 
« Last Edit: September 30, 2014, 07:13:01 PM by bytemaster »
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Offline biophil

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Re: Max Short Holding Period
« Reply #1 on: September 30, 2014, 07:15:21 PM »
When your short order is executed you will be given 30 days until a mandatory cover (without fee) is executed.

This is done to enhance the Nash Equilibrium that will cause shorts to take opportunities to cover at a profit anytime there is deviation from the peg.  After 30 days this will create continual buying pressure on BitUSD.  This will reduce the demand for shorts that are only "long-term" bullish and cause them to be more "medium term" speculators.   If you want to go "long term short" then you will have to cover and re-short monthly.   You maximize your profits by covering and re-shorting when there is the greatest deviation from the peg.

This is in line with traditional financial instruments such as futures contracts that always have a maturity date.   

Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.   

This also provides liquidity from shorts that have lost their keys and are unable to cover and forces shorts that are losing ground to "re-up" their collateral.

Will the GUI clearly provide the time to covering in our list of open shorts?

Sent from my SCH-S720C using Tapatalk 2


Offline bytemaster

Re: Max Short Holding Period
« Reply #2 on: September 30, 2014, 07:17:28 PM »
When your short order is executed you will be given 30 days until a mandatory cover (without fee) is executed.

This is done to enhance the Nash Equilibrium that will cause shorts to take opportunities to cover at a profit anytime there is deviation from the peg.  After 30 days this will create continual buying pressure on BitUSD.  This will reduce the demand for shorts that are only "long-term" bullish and cause them to be more "medium term" speculators.   If you want to go "long term short" then you will have to cover and re-short monthly.   You maximize your profits by covering and re-shorting when there is the greatest deviation from the peg.

This is in line with traditional financial instruments such as futures contracts that always have a maturity date.   

Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.   

This also provides liquidity from shorts that have lost their keys and are unable to cover and forces shorts that are losing ground to "re-up" their collateral.

Will the GUI clearly provide the time to covering in our list of open shorts?

Sent from my SCH-S720C using Tapatalk 2

Yes - we will have a time till expiration next to the cover button.
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Offline mf-tzo

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Re: Max Short Holding Period
« Reply #3 on: September 30, 2014, 08:42:13 PM »
Quote
Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.

Imho this is not very fair... I was very bullish before BTSX was even launched, but could not short because of lack of information, instructions, bugs in the GUI etc.. If everything was clear and working properly I would have shorted @ 45 - 65 range instead of buying BTSX in the exchanges..

Now, people holding short positions at these levels will now have the additional opportunity to keep their orders for 1 year, when others who still experience problems shorting will have to re short within 1 month.

On the other hand I am totally on board that there should be 1 month of expiration. But 1 year to keep open positions for the ones that had the technical knowledge and the competitive advantage of shorting which normally should be people bullish with large capital is too much. In the end of the day for all of us in here it was a no brainer that since the client is launched BTSX would skyrocket.. Not much of a risk to take..The risk is higher now, with bitcoin price and all cryptos falling day by day, than 1 month ago. So why not make it max 2-3 months instead of 1 year?

The other question is, what happens if on the specific day that I have to cover my short I am on holidays and I don't have access to cover? How will the system treat my position?

Offline bytemaster

Re: Max Short Holding Period
« Reply #4 on: September 30, 2014, 08:45:19 PM »
Quote
Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.

Imho this is not very fair... I was very bullish before BTSX was even launched, but could not short because of lack of information, instructions, bugs in the GUI etc.. If everything was clear and working properly I would have shorted @ 45 - 65 range instead of buying BTSX in the exchanges..

Now, people holding short positions at these levels will now have the additional opportunity to keep their orders for 1 year, when others who still experience problems shorting will have to re short within 1 month.

On the other hand I am totally on board that there should be 1 month of expiration. But 1 year to keep open positions for the ones that had the technical knowledge and the competitive advantage of shorting which normally should be people bullish with large capital is too much. In the end of the day for all of us in here it was a no brainer that since the client is launched BTSX would skyrocket.. Not much of a risk to take..The risk is higher now, with bitcoin price and all cryptos falling day by day, than 1 month ago. So why not make it max 2-3 months instead of 1 year?

The other question is, what happens if on the specific day that I have to cover my short I am on holidays and I don't have access to cover? How will the system treat my position?

It is also not fair to change the rules on shorts that are already taken out... many of those who took out shorts knowing that BTSX would be higher in 1 year may not have made the same bet under the new rules.  So each individual is given the rules they entered the position under (more or less).

The market will cover your order like a margin call (accepting what ever bids for your collateral there are at the time), but it will not charge you a 5% fee for being under collateralized.
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Offline donkeypong

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Re: Max Short Holding Period
« Reply #5 on: September 30, 2014, 08:49:24 PM »
When your short order is executed you will be given 30 days until a mandatory cover (without fee) is executed.

This is done to enhance the Nash Equilibrium that will cause shorts to take opportunities to cover at a profit anytime there is deviation from the peg.  After 30 days this will create continual buying pressure on BitUSD.  This will reduce the demand for shorts that are only "long-term" bullish and cause them to be more "medium term" speculators.   If you want to go "long term short" then you will have to cover and re-short monthly.   You maximize your profits by covering and re-shorting when there is the greatest deviation from the peg.

This is in line with traditional financial instruments such as futures contracts that always have a maturity date.   

Older shorts entered before this hard fork will be grandfathered in with a 1 year deadline.   

This also provides liquidity from shorts that have lost their keys and are unable to cover and forces shorts that are losing ground to "re-up" their collateral.

Thank you. I was hoping you'd change this.

Offline starspirit

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Re: Max Short Holding Period
« Reply #6 on: September 30, 2014, 08:55:36 PM »
I'm a little confused because I thought that shorts are required to facilitate growth in the supply of BitAssets. By forcing them to shorter term speculative views, won't this limit supply growth, as well as making it very highly unstable? Its possible there will be times when a huge part of the short book (i.e. supply) is closed in a month and not re-opened for some time depending on the balance os supply and demand at that point.

Also, whenever shorts are forced to cover, that necessarily closes out a group of longs - doesn't that make holding BitUSD more uncertain for merchants and other potential users, if they have to keep constant tabs on whether they are holding BitUSD or BTSX? This makes BitUSD less useful?

Offline bytemaster

Re: Max Short Holding Period
« Reply #7 on: September 30, 2014, 09:08:53 PM »
I'm a little confused because I thought that shorts are required to facilitate growth in the supply of BitAssets. By forcing them to shorter term speculative views, won't this limit supply growth, as well as making it very highly unstable? Its possible there will be times when a huge part of the short book (i.e. supply) is closed in a month and not re-opened for some time depending on the balance os supply and demand at that point.

Also, whenever shorts are forced to cover, that necessarily closes out a group of longs - doesn't that make holding BitUSD more uncertain for merchants and other potential users, if they have to keep constant tabs on whether they are holding BitUSD or BTSX? This makes BitUSD less useful?

Longs are never closed out.... demand for BitAssets is independent of demand to short.  You cannot "create bitassets" just because someone wants to short.   What this does is keeps the supply of BitAssets in check otherwise a huge increase in demand for BitAssets followed by a decrease in demand for BitAssets will leave the BitAssets undervalued until demand returns.   Forcing shorts to cover after 30 days means that BitAsset holders can rest assured that there will be demand 30 days from when they purchased them. 

If no one is willing to sell their BitUSD then old shorts will cover by buying from new shorts.   If there are no new shorts willing to sell then BitUSD will be worth more than $1.00 which will incentives BitUSD selling and shorting.

With this rule the market is asymmetric which means that while BitUSD will never be worth much less than $1... it could be worth more than $1 if there are no sellers and BitUSD holders are not forced to sell.   This asymmetric situation will be partially resolved once we allow shorting BTSX backed by BitUSD... then you will have forced covering on both sides.  It will never be fully resolved because the supply of BTSX is greater than the BTSX created by shorting and thus the forced selling of USD to cover after 1 month may not be enough to bring it back down to $1.00

That said, I doubt there will be a lack of individuals willing to short BitUSD against BTSX.   And once we add other markets allowing you to use any asset as collateral for any other asset then it will likely all balance out over all. 

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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 GaltReport

Re: Max Short Holding Period
« Reply #8 on: September 30, 2014, 09:18:44 PM »
Glad you are grandfathering "old shorts" in.  It's all getting rather complicated...hope at some point there is a trading guide of sorts.

Offline Agent86

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Re: Max Short Holding Period
« Reply #9 on: September 30, 2014, 11:05:16 PM »
Forced 30 day covering feels pretty aggressive to me.  I feel like having it just be one year (consistent with the inactivity fee) would be fine.  I'm not saying there's a right answer but it seems unnecessarily short to me.  I think the main benefit of a new short window would only be achieved if current shorts were not grandfathered in - we could sort of hit the reset button on the market that may have created a bit too much bitUSD supply in the early days without short restriction.  I don't think there's a moral imperative to give current shorts an exception but it is what it is…  I'm just not sure having a short 30 day with grandfathering cover has a real advantage over a one year force cover.

Offline mf-tzo

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Re: Max Short Holding Period
« Reply #10 on: September 30, 2014, 11:18:59 PM »
I think it is very important to have an expiry date of 1 month. This will definitely create confidence for liquidity of bitusd and create buying pressure for bitusd. You can always re short if you want so I don't understand what is the benefit for holding a short position for 1 year (even for the old shorts)...

Offline bytemaster

Re: Max Short Holding Period
« Reply #11 on: September 30, 2014, 11:19:49 PM »
Forced 30 day covering feels pretty aggressive to me.  I feel like having it just be one year (consistent with the inactivity fee) would be fine.  I'm not saying there's a right answer but it seems unnecessarily short to me.  I think the main benefit of a new short window would only be achieved if current shorts were not grandfathered in - we could sort of hit the reset button on the market that may have created a bit too much bitUSD supply in the early days without short restriction.  I don't think there's a moral imperative to give current shorts an exception but it is what it is…  I'm just not sure having a short 30 day with grandfathering cover has a real advantage over a one year force cover.

It is very necessary because without it the varying demand for BitUSD will cause the peg to suffer.... suppose there is a massive increase in BitUSD demand (BTSX Bubble) so the supply doubles pairing to shorts who don't want to cover for a year.  Then all of a sudden people want out of BitUSD (Bubble is Over)... there are not enough buyers on the market and the long-term shorts don't want to cover (they have potentially lost money as BTSX was falling so don't want to realize their loss.   The only solution the market has at this point is for BitUSD holders to sell at a loss large enough to motivate long-term holders.   The fact that they are selling at a loss will discourage future BitUSD holders from buying.   

In the long-run, you can increase the forced covering period or remove it all together... but in a young illiquid market it is certainly necessary to ensure that there is plenty of liquidity and that BitUSD will always revert to the peg within a month of any increase in supply.   
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 toast

Re: Max Short Holding Period
« Reply #12 on: September 30, 2014, 11:23:22 PM »
I think it is very important to have an expiry date of 1 month. This will definitely create confidence for liquidity of bitusd and create buying pressure for bitusd. You can always re short if you want so I don't understand what is the benefit for holding a short position for 1 year (even for the old shorts)...

The theoretical benefit for a short for being able to hold a losing short position is that it is effectively the same as letting you re-short with less than 200% collateral which is higher leverage.

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Offline Agent86

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Re: Max Short Holding Period
« Reply #13 on: September 30, 2014, 11:37:38 PM »
Forced 30 day covering feels pretty aggressive to me.  I feel like having it just be one year (consistent with the inactivity fee) would be fine.  I'm not saying there's a right answer but it seems unnecessarily short to me.  I think the main benefit of a new short window would only be achieved if current shorts were not grandfathered in - we could sort of hit the reset button on the market that may have created a bit too much bitUSD supply in the early days without short restriction.  I don't think there's a moral imperative to give current shorts an exception but it is what it is…  I'm just not sure having a short 30 day with grandfathering cover has a real advantage over a one year force cover.

It is very necessary because without it the varying demand for BitUSD will cause the peg to suffer.... suppose there is a massive increase in BitUSD demand (BTSX Bubble) so the supply doubles pairing to shorts who don't want to cover for a year.  Then all of a sudden people want out of BitUSD (Bubble is Over)... there are not enough buyers on the market and the long-term shorts don't want to cover (they have potentially lost money as BTSX was falling so don't want to realize their loss.   The only solution the market has at this point is for BitUSD holders to sell at a loss large enough to motivate long-term holders.   The fact that they are selling at a loss will discourage future BitUSD holders from buying.   

In the long-run, you can increase the forced covering period or remove it all together... but in a young illiquid market it is certainly necessary to ensure that there is plenty of liquidity and that BitUSD will always revert to the peg within a month of any increase in supply.
I guess I just don't see people "dropping their pants" to unload bitUSD if they know that holding for less than a year will give them face value.  I'm not saying your view doesn't have merit but I think if it's that critical the over-creation of bitUSD probably already happened and now most will be grandfathered anyway - it would be kind of nice to reset the market in the short run.

Offline theoretical

Re: Max Short Holding Period
« Reply #14 on: September 30, 2014, 11:44:44 PM »
You can always re short if you want so I don't understand what is the benefit for holding a short position for 1 year (even for the old shorts)...

If the price rose, then re-shorting the same number of BitUSD would require more collateral.

E.g. if price is at 30 BTSX / BitUSD today and you short 100 BitUSD.  Then BitUSD rises to 40 tomorrow, then drops to 20 in 6 months.  With one-year expiry, you have 3000 BTSX tied up for 6 months.  With one-month expiry, you have 3000 BTSX tied up for one month, then you have to re-short at 40 which ties up 4000 BTSX for the remaining 5 months (unless you re-short less than 100 BitUSD).
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