When I say above the price feed i mean that the bitasset is overvalued (so feed is in BTS per bitasset). I get super confused when the feed is described the other way so this is how I have to think of it .
Normally I think of it in BTS/BitAsset as well. In this case, I switch to BitAsset/BTS because otherwise I don't think I would be able to accurately say "10% above the price feed". If the way the system is programmed is to buy BitAsset sell orders down to 10% below the price feed (in BitAsset/BTS), that means it will buy down to a price limit of p BitAsset/BTS where p = 0.9*f and f is the price feed in BitAsset/BTS. If I were to invert the price units, I would have a price limit of 1/p BTS/BitAsset and 1/p = (1/0.9)*(1/f) where the price feed is (1/f) BTS/BItAsset. That means the margin calls would buy BitAsset sell orders up to 11.1111% (1/0.9 - 1 = 1/9) above the price feed (in BTS/BitAsset). As much as I hate thinking in this backwards way, I prefer a nice number like 10% much more than a number with repeating decimals.
Right this makes sense. As long as they'll get margin called if the collateral goes too low then there's nothing wrong with letting their order sit at the price feed. At first I thought it was unfair they wouldn't have to pay interest, but at high bitasset demand interest rate goes to 0 anyway.
Actually, according to bytemaster's
post, the expired post still pays interest. So if they have a non-zero interest rate, it provides them with an incentive to either cover before expiration or if they fail to do that before expiration they can just buy the BitUSD they were going to buy anyway to cover and use it to buy their expired shorts cover order. Considering the fact that you could not guarantee that you would match your short's cover rather than another short's cover (not to mention any legitimate BTS sell orders at or below, again in BitAsset/BTS, the price feed), I would feel a lot more comfortable with covering my short before it expires even if it had zero interest rate (after all you need to consider the opportunity cost of your BTS collateral).
If the feed is 100 BTS per bitUSD, then if there's a buy order at 115 BTS per bitUSD it should be possible to match that buy order and all other buy orders by shorting all the way down to the feed price for an instant expected profit (since you can expect bitasset price to tend towards the feed price). Then every time bitasset demand increases enough to make buy orders go above the feed, there will be an incentive to short the bitasset since you can be certain you will profit from the amount that the buy orders exceed the feed price.
One would certainly hope so (regarding the bolded part), or else the peg wouldn't be working well. But there is no reason why the lowest BitUSD sell/short order couldn't remain above 115 BTS/BitUSD over the following 30 days. Then if after those 30 days the price feed has moved up above 115 BTS/BitUSD, you could end up being forced to cover at a loss (even without a margin call).