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General Discussion / Re: Requesting clarification on short-covering in under-collateralised scenario
« on: October 29, 2014, 05:58:32 am »Here's some numbers that might help clarify my post.
Say bitUSD price is 50 and a short of 100 bitUSD is opened, requiring 5000 BTS from the long and 10000 BTS from the short as collateral, for 15000 in collateral in total.
Scenario 1 (fully collateralised)
Suppose bitUSD price goes to 75 and the short covers the full 100 bitUSD. This requires 7500 BTS in collateral to buy back at the new price, leaving 7500 (of the original 15000 placed into the pool) to be returned to the short. He has lost 25% of his original 10000 BTS.
Scenario 2 (under-collateralised)
Suppose bitUSD moves sharply to 200 before the automatic short cover can kick in. It now requires 20000 BTS to buy back 100 bitUSD to fully cover the short, but there is only 15000 BTS originally contributed by the long and short. So what is the rule here for how the 100 bitUSD get covered?
Thanks.
"In the rare event that the value of BTSX falls by more than 50% in less than an hour resulting in insufficient collateral, 100% of the collateral will be used to cover as much BitUSD as possible leaving some BitUSD uncovered. "
http://wiki.bitshares.org/index.php/BitShares_X#Overview