Big BitUSD Shorts?? 3million BTS

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-snip-

Interest Rate: it's APR (Annual Percentage Rate).

How I understand it:

If you set it to 12% and you close this position after 30 days your interest rate is 1%. make sense?

[GChicken]

Thank you Xeroc from all the post and videos i had looked at i never felt i was fully understanding the mechanics as the were developed.

much clearer in my mind now; appreciate all your efforts, even if it is only for the next month or so

Cheers,
GC

[xeroc]

Shorts pay an interest that amounts for a total of X bitUSD (X BTS @ a price per USD) ... Y bitUSD exist .. hence you distribute X bitUSD among the Y bitUSD in existence (early percentage)

in the above are you saying that i have to pay an interest rate based of the
amount of BitUSD i shorted/created in proportion to the current amount of BitUSD
in existence? like a weighted average of the network interest rate?

When you want to short bitUSD into existence you may need to define an interest
rate > 0 (because competing shorts may do so as well). Anyway, once your short
is filled (by a buyer), you will need to pay your interest as an "extra" to
cover your short position eventually. That fixed amount goes into a pool
(on-chain). Now, if anyone holding bitUSD moves his funds, he is allows to take
a percentage out of this pool. The percentage is something like (don't nail me
on that)

 USD you hold / total bitUSD in existence  x  time in seconds you have not moved them   /   seconds per year

the more you hold, the more you can take out .. normalized to a year.

is the above pictured interest rate the actual annualized interest rate i pay on the shorted BitUSD? - seems fair the tool tip says "the interest rate you are willing to pay"

Not sure if that is "per year" .. it may be per short period of max 30 days ..
honestly .. I don't know .. (not a trader)

Again sorry for all the question, just want to make sure i understand the mechanics of this before i put it to rest.

Sure .. do your research!

i hope other people will also get benefit from reading this.

in any case it seems like you are happy that situation b is a good move to collect interest while still retaining all your Bitshares.

Let me tell you that BitShares 2.0 will not offer interest for holders .. hence
shorting bitUSD also does not require an interest to be paid:
https://bitshares.org/blog/2015/06/08/lessons-learned-from-bitshares-0.x/#socialized-yield-is-broken

I know that with these changes, the bitUSD loses alot of attraction .. but rest
assured, that the devs are working on a bond market to resurect interest paying
contracts.

Cheers
 -- Fabian

[GChicken]

Thanks for your help Xeroc and Jsidhu

i couldn't quite get this statement below.. Sorry :/.  i see that interest is actually paid in BTS not BitAssets but how is the interest rate derived.
 

Shorts pay an interest that amounts for a total of X bitUSD (X BTS @ a price per USD) ... Y bitUSD exist .. hence you distribute X bitUSD among the Y bitUSD in existence (early percentage)

in the above are you saying that i have to pay an interest rate based of the amount of BitUSD i shorted/created in proportion to the current amount of BitUSD in existence? like a weighted average of the network interest rate?

or

is the above pictured interest rate the actual annualized interest rate i pay on the shorted BitUSD? - seems fair the tool tip says "the interest rate you are willing to pay"

Again sorry for all the question, just want to make sure i understand the mechanics of this before i put it to rest.
i hope other people will also get benefit from reading this.

in any case it seems like you are happy that situation b is a good move to collect interest while still retaining all your Bitshares.

Thank you,
GC

[jsidhu]

I think situation a is useful if buying BitUSD in liquid environment.. Currently you won't get much volume at market rates.

Situation b reminds me of 10 yr bond yields (interest charged to short money into existence 1%) vs cap rate of 5% ( interest to hold money tied in collateral) so you make 4% with risk being holding the underlying asset.analogous to commercial real estate.

[xeroc]

@GChicken: The 2x collateral is paid 50/50 buy the short seller and the buyer .. so in fact you only reduce your own balance by 350BTS but also won't get anything from selling since the buyer pays the other 350BTS.

If you short to yourself you don't gain anything (except the interest) .. hence your situation A) and B) seem both to be correct.

-Is the interest paid on short positions an average of all short position in existence similar to the interest paid for hold BitUSD? or is it the rate which was specified when creating the short sell (1%)?

Shorts pay an interest that amounts for a total of X bitUSD (X BTS @ a price per USD) ... Y bitUSD exist .. hence you distribute X bitUSD among the Y bitUSD in existence (early percentage)

-If the above is correct and interest is based on the rate specified when creating short sell, Situation B seems like an attractive way to hold BTS while also pulling in some interest from the network... yes?

Indeed!

[GChicken]

Hi Guys,

Thanks you kindly for your responses;
I have read a bunch more posts and the wiki and hope that someone could please point out any issues or misunderstandings in the verbose situation below.

##############################################
I short 1 BitUSD at price of 350BTS/1BitUSD @ APR(interest) of 1% p/a; this will lockup 2 * the price (700BTS) as collateral in the network as assurance.
The action of creating a short lodges a sell order for 1 BitUSD @ 350BTS on the market.

Situation A)
Alice buys my BitUSD she now owns 1 BitUSD and the 350BTS she paid is also locked up in the network (now collateral = 1050BTS)

Situation B)
I buy my own BitUSD short now I own 1 BitUSD and the 350BTS I paid is also locked up in the network (now collateral = 1050BTS)

##10 Day Later##: The price of Bitshares has risen 100% against BitUSD and I wish to cover my short position.

Situation A)
I purchase the initial 1 BitUSD + 0.000273973 BitUSD (10 days interest =((0.01/365)*10) * 1 BitUSD) + 0.005 BitUSD (transaction fee) that I owe to the network at the market price of 175BTS/1BitUSD and 'cover' my position which destroys the 1 BitUSD I have and releases the 1075BTS collateral locked up in the network; Therefore I have made a 174.077054725BTS profit after paying the transaction fee and 10day interest)

Situation B)
I still own the 1 BitUSD I brought from myself so no need to purchase BitUSD at market to cover position. Therefore I have not made any capital gain on the back of the price increase, but I may have made some % in interest; (BitUSD interest is ~5% p/a for holding BitUSD and a cost of 1% p/a for my short position); Therefore my net profit is 4% - 0.005 BitUSD (transaction fee)
##############################################

Questions
-Is the interest paid on short positions an average of all short position in existence similar to the interest paid for hold BitUSD? or is it the rate which was specified when creating the short sell (1%)?

-If the above is correct and interest is based on the rate specified when creating short sell, Situation B seems like an attractive way to hold BTS while also pulling in some interest from the network... yes?

Phew..
For those of you still reading, Thank you very much for the time in considering the situation above.

Cheers,
GC

[EstefanTT]

So do I ! Well ... in fact I'm rolling over, I thought .000019 was the bottom 

[liondani]

Someone has locked away collateral (from your pic: 5x500kBTS *2, where a 2 denotes the collateral ratio of 200% -- i.e. 1 bitUSD is backed by 2bitUSD worth of BTS) ..
so .. someone has locked away collateral and created bitUSD and instandly sold it to somone else .. (or maybe to himself -- we can't know for sure)

odds are ... to himself

[xeroc]

Someone has locked away collateral (from your pic: 5x500kBTS *2, where a 2 denotes the collateral ratio of 200% -- i.e. 1 bitUSD is backed by 2bitUSD worth of BTS) ..
so .. someone has locked away collateral and created bitUSD and instandly sold it to somone else .. (or maybe to himself -- we can't know for sure)

[GChicken]

Hi All,
Noticed some big shorts on bitsharesblocks (6x 500k BTS / 6x $1475 BitUSD )
http://bitsharesblocks.com/asset/orderbook?asset=USD

Can someone please help me under stand the short positions pictured below and the idea of shorting to one self, its away been something i have not be able to get my head around. if anyway has a good way of thinking about it and or can help me user stand what happened here. ELI5 if you have too

is it likely that the person making those trades i bullish on Bitshares? or is it the other way round?

5 of 6 shorts shown below:


Thanks,
GC