'I don't follow... do it step by step. I buy both bts and bitusd. Now what?'
You buy 1 bitUSD and sell 1 bitUSD BTW not 'buy both bts and bitusd.'
Neutral* bitAsset position with unlimited max gain.
*[neutral] Read with limited max loss of 0 i.e. riskless (for this particular asset) and at 0 cost;
0 risk and 0 cost (and do not star arguing that there is commission, so it is not 0 cost – for all practical purposes it is 0 cost) with gain potential - generally no one in his right mind offers such benefits. It is potentially a lot for nothing situation…
How one profits from this? – I do not know yet, working on it… all I know it is a situation that is so good it is not logical to exist. Close relative: lotto ticket at ~0 price and 10^-12 chance to win $100. => the lotto organizer is doing something wrong.
I like this kind of analysis... lets see if I can rephrase it.
You buy 1 BitUSD and short 1 BitUSD and we assume parity at the time you took the position; therefore your account looks like:
2 BTS held as collateral for 1 BitUSD
1 BitUSD held on your balance sheet.
Total Initial Cost: 2 BTS.
If BTS goes down your short position is wiped out and you can sell your 1 BitUSD for 2 BTS... break even.... it may be possible for someone else to call your short and thus the going price for you to sell your 1 BitUSD for may be less than 2 BTS.
If BTS doubles in value, then you can cover for .5 BTS and sell your 1 BitUSD for 2 for a grand total of 3.5 BTS, a gain of 1.5 BTS.
If you held 2 BTS then you could have had 4 BTS or a .5 BTS opportunity cost
So the conclusion would be that the 'always win' move is to hold both at the same time... If there is a always win position that might suggest there there is an always loose position and that the system is unbalanced. Either that or the 'always win' move isn't truly an always win position.
So I think I found the problem with the analysis... It is always win in terms of BTS, but if you do it in terms of USD then it isn't. Lets run the same numbers again.
Initial Cost $2 to buy 2 BTS and enter the short/long position at the same time.
BTS crashes... you end up with 2 BTS worth $0.50 for a total of $1 (a 50% loss or more)
BTS doubles... you end up with 3.5 BTS worth a total of $7 for an opportunity cost of $1
If instead you had gone long 2 BitUSD then you would have ended up with 4 BTS worth $2.00 (break even or less).
So I think we need to be very careful how we calculate our profits and losses with various trading strategies because it is very easy to be deceived into thinking you have gains which are just nominal rather than real.
To get a better understanding I will do the 2 possible neutral positions (let’s call them ‘Simple Neutral Position’ and ‘System Enhanced Neutral Position’) in parallel, so it is easier to see the differences:
1.Open the position
‘Simple Neutral Position’
2 BTS held on the balance sheet.
Total Initial Cost: 2 BTS.
Initial Cost $2 to buy 2 BTS.
-------
‘System Enhanced Neutral Position’:
You buy 1 BitUSD and short 1 BitUSD and we assume parity at the time you took the position; therefore your account looks like:
2 BTS held as collateral for -1 BitUSD
1 BitUSD held on your balance sheet.
Total Initial Cost: 2 BTS.
Initial Cost $2 to buy 2 BTS and enter the short/long position at the same time.
2. Scenario - BTS doubles...:
‘Simple Neutral Position’ 2BTS * $2 = $4;
‘System Enhanced Neutral Position’ – you sell your 1bitUSD and at the same price cover your short (i.e -1 bitUSD); 2 BTS collateral is released back to you; 2BTS * $2 =$4
3. Scenario - BTS crashes...:
‘Simple Neutral Position’: 2 BTS worth $0.33 for a total of $.66
‘System Enhanced Neutral Position’ ; your short was closed so you end with 0 BTS from the collateral; you have 1 bitUSD worth 3.03 PTS; you sell it and end up with 3 BTS; 3*$0.33~ $1
In the last scenario you see the enhancement;
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