Okay, final scenario using simple numbers as an example. Say I want to determine my maximum risk of loss in case a margin call is triggered. From my calculations below, it appears that the maximum loss is only 16.66% before you get margin called, but I feel like there must be something wrong with my numbers. Can anyone point me in the right direction? Also, what would be so risky about shorting say 49% of your wallet balance (thus having the remaining 49% tied up as collateral)? If you get margin called, wouldn't the collateral go towards paying the difference, and thus you wouldn't have a need to hold additional BTSX beyond that (the "s" variable in arhag's math)? I feel like I'm still missing something fundamental here...
p1 = 30 BTSX/BitUSD
p2 = 0.1 BTSX/BitUSD
x = 100 BitUSD
m = 3,000 BTSX
wallet = 6,005 BTSX
p1 * x + m = collateral (c)
30 * 100 + 3,000 = 6,000 BTSX tied up as collateral
(p1 - p2) * x + c = BTSX in possession after covering
(30 – 0.1) * 100 + 6,000 = 8,990 BTSX in possession, gain of 2,990 BTSX (49.8% gain, close to max theoretical gain of 50%)
(30 – 40 ) * 100 + 6,000 = 5,000 BTSX in possession, loss of 1,000 BTSX (16.66% loss)