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Messages - Agent86

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46
General Discussion / Re: Whitepapers & Broschures
« on: December 02, 2014, 10:57:46 pm »
Yes I know Agent.
I tied to correct the mistake the same day the post was made 11/24... but as BM was pretty unhappy with me arguing with you, I had to do it in unrelated thread...


I will give  all of you sparkly lovers and enthusiasts this much:
260% inflation in a Sparkling NEW POW coin is exiting, up to 6.5% in DPOS sent a mass sell waves to the exchanges...go figure.

PS
Speaking of percentages - 2 times increase in the price of a bitAsset is 50% drop in the price of BTS not 33%...
I even confirmed the rules with BM verbally because I wasn't sure; so I'm not taking full responsibility for this :P ... I know he thinks of the market reversed from most people (buy BTS with bitUSD) so maybe that has something to do with it.

So yeah Xeroc, your original wording is right:

"Short orders are forced to cover when 66% of their collateral is required to cover, leaving the short with 33% of the collateral minus a 5% fee."

(and margin call level is best described as 1.5x NOT 2X!)

47
General Discussion / Re: Whitepapers & Broschures
« on: December 02, 2014, 09:39:20 pm »
I hope the rest of the world understands your 'easy' explanation... Cause I for sure do not...
You can help out?

Margin call ( or forced cover) is triggered when the price of the bitAsset doubles(increases 2 times). In other words, when 66% of the collateral is needed to repurchase  the bitAssets owed.


*Price of bitAsset in BTS/bitAsset

NB Those are by the rules I am aware of. If the rules have changed adjust accordingly!
Tony the rules were changed as I have mentioned so the margin call happens at 2x collateral now instead of 1.5x.

My explanation reflects exactly that state of the rules. It just avoids the incomprehensible, in my view, term 2x collateral.
Leave it as you like, but I personally understood it only because I know what you were talking about.
Yea tony, you are right...  I just opened the client and did the math, I should have done this in the first place!!

Bytemaster's explanation for the margin call level totally threw me off and I think it is wrong.

Bytemaster's explanation:
"Stated another way, if the value of BTS falls by 33% from the time the short position is entered, then a margin call will occur."

bytemaster's explanation should be:

"Stated another way, if the value of BTS falls by 33% 50% from the time the short position is entered, then a margin call will occur."

Now I'm sure I've just added to confusion...  :-[

Sorry Markus:
I agree that my original statement of 1.5x in the first version and the explanation bytemaster added were inconsistent, but I think bytemaster had it right because I think we changed the margin call level to 2x as in the updated version.

48
General Discussion / Re: Whitepapers & Broschures
« on: December 02, 2014, 08:27:12 pm »
Thanks, thats much more clear. :)


It appears that if you are shorting above the feed price, you can give a 0% interest rate and it will not hurt your chances of getting your short filled.  Is that right?
Yes

49
General Discussion / Re: Whitepapers & Broschures
« on: December 02, 2014, 08:24:20 pm »
I hope the rest of the world understands your 'easy' explanation... Cause I for sure do not...
You can help out?

Margin call ( or forced cover) is triggered when the price of the bitAsset doubles(increases 2 times). In other words, when 66% of the collateral is needed to repurchase  the bitAssets owed.


*Price of bitAsset in BTS/bitAsset

NB Those are by the rules I am aware of. If the rules have changed adjust accordingly!
Tony the rules were changed as I have mentioned so the margin call happens at 2x collateral now instead of 1.5x.

50
General Discussion / Re: Whitepapers & Broschures
« on: December 02, 2014, 08:14:26 pm »
When are margin calls triggered? The first version posted by BM says 33%, the second version by Agent says nothing about percentages and the wiki says 25% (http://wiki.bitshares.org/index.php/BitShares/Short#Market_Rules_for_Shorts).

The rules there state the following:
Let us discuss the rules that need to be fulfilled in order to successfully go short. Short orders can only get executed (i.e. filled) under these conditions:

    There is someone willing to buy BitUSD at the price feed
    AND Your short order offers the highest interest rate
    AND Your price limit is lower than the feed (BTS per USD) or you didn't specify a price limit.
    AND You have enough collateral to provide 2x backing at the feed price (amount of USD for short sale will vary with feed price)
    OR Your price limit is higher than the feed (BTS per USD) and someone is willing to buy at your price limit.


I find this confusing.  There are some AND conditions and then an OR condition, but it is not clear where the parentheses should be on evaluating those conditions.  Where does the OR condition apply?

Based on how it is written, one might read it and think that if the "OR Your price limit is higher than the feed (BTS per USD) and someone is willing to buy at your price limit" were true, then you wouldnt need any of the others to be true (you wouldnt need collateral, etc).  That is a clearly wrong interpretation.

Which statement does the OR actually match up with?



I believe the actual rules are like this:

In order to short you must fulfill one of these conditions:

* (Your price limit is higher than the feed) AND (someone is willing to buy at your price limit).

OR

* (There is someone willing to buy BitUSD at the price feed) AND (Your short order offers the highest interest rate) AND (Your price limit is lower than the feed OR you didn't specify a price limit).

Additionally, for either case, you must have enough collateral to provide 2x backing at the feed price (amount of USD for short sale will vary with feed price).
   

We need to clear this up.  I'm not even sure if my version is correct.
    {
    There is someone willing to buy BitUSD at the price feed
    AND Your short order offers the highest interest rate
    AND (Your price limit is lower than the feed (BTS per USD) or you didn't specify a price limit.)
    AND You have enough collateral to provide 2x backing at the feed price (amount of USD for short sale will vary with feed price)
    }
OR
    {
    Your price limit is higher than the feed (BTS per USD)
    AND someone is willing to buy at your price limit.
    AND You have enough collateral to provide 2x backing at your price limit
    AND Your short sell order is the lowest price bitUSD for sale
    }

51
General Discussion / Re: Whitepapers & Broschures
« on: December 02, 2014, 03:39:12 pm »
How about

* Short orders are '''forced to cover when a margin call''' is triggered as the value of the collateral falls below 2x of what is needed to cover. A 5% fee is applied.
This seems fine to me.

52
General Discussion / Re: Whitepapers & Broschures
« on: December 02, 2014, 03:30:18 pm »
When are margin calls triggered? The first version posted by BM says 33%, the second version by Agent says nothing about percentages and the wiki says 25% (http://wiki.bitshares.org/index.php/BitShares/Short#Market_Rules_for_Shorts).
My paper says a margin call is triggered when the collateral drops below 2x the value of the bitAssets it is backing.  Implicit in this statement is that a fall of 33% from an initial collateral amount of 3x will trigger a margin call.

25% was the old system and corresponds to a drop from initial collateral of 2x to a margin call trigger of 1.5x.
Hmm .. "good" to know .. let's update the wiki

would this be o.k.?

 
Quote
Short orders are forced to cover when 66% of their collateral is required to cover, leaving the short with 33% of the collateral minus a 5% fee.
No, the way you are wording it is not correct.  Short orders are forced to cover when 50% of their collateral is required to cover but this happens when their BTS is worth 66% of what it was was worth when they took out the position (in relation to the bitasset).  In any case I think the way these things have been worded makes it confusing.  That's why I prefer to not use percentages that reference the initial value of the collateral when the position was opened.  I would just focus on what triggers the margin call, i.e. A margin call is triggered when the value of the collateral falls below 2x what is needed to cover.

53
General Discussion / Re: Whitepapers & Broschures
« on: December 02, 2014, 11:16:14 am »
When are margin calls triggered? The first version posted by BM says 33%, the second version by Agent says nothing about percentages and the wiki says 25% (http://wiki.bitshares.org/index.php/BitShares/Short#Market_Rules_for_Shorts).
My paper says a margin call is triggered when the collateral drops below 2x the value of the bitAssets it is backing.  Implicit in this statement is that a fall of 33% from an initial collateral amount of 3x will trigger a margin call.

25% was the old system and corresponds to a drop from initial collateral of 2x to a margin call trigger of 1.5x.

54
General Discussion / Re: Potential Market Manipulations on BitAssets
« on: December 01, 2014, 08:30:45 pm »
Expired shorts don't ever buy back above the price feed, they just make a buy wall there.
Ahh, that's good - I was not aware of that! Was it a recent change or introduced with the initial expiry rules?
My opinion is that this is not a good rule.  I would rather see shorts have to take the risk that they may pay above feed price.  I think this rule makes the likelihood of under-collateralized bitAssets higher.

Within limit or we get new attacks on thin markets.
I don't have a strong objection to a limit that at least gives substantial room for shorts to be forced to cover above the peg when no other sellers exist.

But generally short sellers need to change their behavior to mitigate and protect themselves from these "attacks".  If we allow short sellers to sell at a fixed offset above the peg, these are tools short sellers can use to ensure sufficient depth and protect themselves from a short squeeze.  Protecting bitAsset holders from loss is more important than protecting short sellers.  I also think we should ultimately be using the lowest priced bitUSD for sale as a measure for margin calls and not the price feed.

55
General Discussion / Re: Potential Market Manipulations on BitAssets
« on: December 01, 2014, 07:18:11 pm »
Expired shorts don't ever buy back above the price feed, they just make a buy wall there.
Ahh, that's good - I was not aware of that! Was it a recent change or introduced with the initial expiry rules?
My opinion is that this is not a good rule.  I would rather see shorts have to take the risk that they may pay above feed price.  I think this rule makes the likelihood of under-collateralized bitAssets higher.

56
General Discussion / Re: Whitepapers & Broschures
« on: November 30, 2014, 02:42:03 pm »
Starspirit, maybe I'm not following what you mean in everything you said, but as far as I can tell, none of the chains of events you envision hurt bitAsset holders other than under-collateralization which is discussed in the paper.


BTW your above explanation for why shortselling isn't bullish makes no sense at all.  You say if someone sells some stake but uses remaining stake to short bitUSD it isn't bullish on the direction of BTS vs the bitassets as I stated in my paper.  But no one would do that unless they thought BTS would go up in value relative to bitUSD so it's still bullish.  This just describes someone who is bullish but also needs money for something else; it also isn't "arbitrage".

My original point was that a trader taking a short position may not be bullishly motivated in taking it, if they are hedging their position as one leg of a trade solely to take advantage of a bitAsset premium. The fact as to whether they hold any stake beforehand is irrelevant to their motivation behind the new trade - they have not adopted a more bullish stance. They are not seeking to increase BTS exposure, or having any net impact on the BTS price. Its further possible they may only own some BTS as inventory for this sole purpose rather than actually having a bullish outlook. I am still agreeing with you that the (naked) short position is a "bullish position" - but that's a quality of the instrument not necessarily the trader. (You're correct its not an arbitrage, but its the least-risk implementation to take advantage of the bitAsset premium).

Having said all that, this particular debate possibly seems out of proportion with your original intent.
I admit I never would have anticipated the level of controversy and analysis brought on by this statement:
"Short sellers are typically bullish on the direction of BTS vs. the market pegged asset."

It still seems innocuous to me and accurate but I can accept that not everyone will be happy with my writing. 

Feel free to rewrite whatever you wish.



I guess my difficulty is I'm not seeing something that falls outside the categories of risk for bitAsset holders that I discussed and I don't want to add too many hypotheticals to the paper that might cause more confusion.  If there is something you think should be added I would just want it to be as short and clearly articulated as possible, keeping in mind it isn't an investment prospectus/ BTS trading guide, it's geared to bitAsset holders.

You might even consider organizing your ideas into a trading guide for BTS/shortselling or a group of recommendations you favor.

57
General Discussion / Re: Whitepapers & Broschures
« on: November 29, 2014, 09:38:29 pm »

Quote
I think you have something backward... if a short seller sells bitUSD at the feed price and buys it above the feed price they have lost money, not made money.
Ops, I confused that...

Quote
If bitUSD is priced above the feed on the internal market, it motivates short sellers to short on the assumption the exchange rate will eventually go back down so they will be able to cover later for less.  But it is not specifically an immediate arbitrage situation in and of itself.
Is that enough to create the necessary BitUSD if there is a big demand for it? Why should the price of bitusd go down? It's not a clear decision for potential shorters to short on that assumption even if the demand for bitusd is big signaled by the high price of bitusd.
No other mechanism is needed to make the bitUSD price go back down simply because (above parity) there's no limit to the supply.
There is a limiting factor on the supply, being the market's appraisal of the value of BTS (BTS market cap). Once nearly all the BTS are in the collateral pool, there is no scope left for traders to create more bitAsset. BTS are traded in a free market, so there is no way to guarantee that the BTS market cap will remain far above 3x bitAssets. In such a situation a bitAsset premium could be sustained indefinitely. There is no mechanism in this situation that can force the bitUSD price down, except possible that potential bitUSD buyers realise that bitUSD is suddenly more risky.
There's no practical limit to the supply of bitAssets in part because there's no specific limit on the marketcap of BTS.  The marketcap of BTS will be driven upward long before "all the BTS are in the collateral pool" and people will cover and re-short to free collateral.

I'm only saying that users of shorts (e.g. arbitragers) do not need to be bullishly motivated. The easiest example is where the trader has an existing inventory of BTS, enters a short on 1 unit of bitAsset... then sells an equivalent value of his BTS for fiat to ensure his total BTS exposure is unchanged at the end. You can call this an arbitrage, although its not really risk-free

BTW your above explanation for why shortselling isn't bullish makes no sense at all.  You say if someone sells some stake but uses remaining stake to short bitUSD it isn't bullish on the direction of BTS vs the bitassets as I stated in my paper.  But no one would do that unless they thought BTS would go up in value relative to bitUSD so it's still bullish.  This just describes someone who is bullish but also needs money for something else; it also isn't "arbitrage".

58
General Discussion / Re: Whitepapers & Broschures
« on: November 29, 2014, 07:27:25 pm »

Quote
I think you have something backward... if a short seller sells bitUSD at the feed price and buys it above the feed price they have lost money, not made money.
Ops, I confused that...

Quote
If bitUSD is priced above the feed on the internal market, it motivates short sellers to short on the assumption the exchange rate will eventually go back down so they will be able to cover later for less.  But it is not specifically an immediate arbitrage situation in and of itself.
Is that enough to create the necessary BitUSD if there is a big demand for it? Why should the price of bitusd go down? It's not a clear decision for potential shorters to short on that assumption even if the demand for bitusd is big signaled by the high price of bitusd.
No other mechanism is needed to make the bitUSD price go back down simply because (above parity) there's no limit to the supply.

59
General Discussion / Re: Whitepapers & Broschures
« on: November 28, 2014, 08:41:47 pm »
Am I right about the following?

When there is a big demand for BitUSD the price of BitUSD will rise and if it rises above the level of the price feed BitUSD shorters can make a profit from shorting BitUSD and buying the BitUSD that are above the feed price and exchanging those for the collateral again?
Unless I'm misunderstanding you, this is not correct.  Shorting bitUSD and then buying bitUSD back and covering would just leave you where you started unless the exchange rate changed.
The scenario I was coming from was: How does the market regulate the amount of BitUSD available when there is a huge demand for it that excees the supply.
Say someone with a lot of cash flow sees a lot of value in BitUSD and wants to do all his/her banking with it. Then that person would buy up all BitUSD below and at the price feed and eventually push the price of BitUSD above the feed price. Then a short seller can buy those BitUSD that trade above the feed price and short BitUSD at the price feed (I assumed that shorting always happens exactly at the price feed, is that correct?) at the same time and make a profit by covering with the BitUSD he bought above the feed price.
I think you have something backward... if a short seller sells bitUSD at the feed price and buys it above the feed price they have lost money, not made money.

The assumption that short selling always happens at the feed is also not correct.  Shorts that have a floor price above the feed could match above the feed.  (I've also been trying to convince BM to make a fixed offset option for short sellers who want to short above the feed but track the feed price).

If bitUSD is priced above the feed on the internal market, it motivates short sellers to short on the assumption the exchange rate will eventually go back down so they will be able to cover later for less.  But it is not specifically an immediate arbitrage situation in and of itself.

60
General Discussion / Re: Whitepapers & Broschures
« on: November 28, 2014, 07:57:16 pm »
Am I right about the following?

When there is a big demand for BitUSD the price of BitUSD will rise and if it rises above the level of the price feed BitUSD shorters can make a profit from shorting BitUSD and buying the BitUSD that are above the feed price and exchanging those for the collateral again?
Unless I'm misunderstanding you, this is not correct.  Shorting bitUSD and then buying bitUSD back and covering would just leave you where you started unless the exchange rate changed.

If BTS falls too fast the margin calls can not automatically buy back enough BitUSD since there just might not be enough new BitUSD shorts or normal BitUSD sellers. Correct?
Yes, this is basically correct.  (I would change "can not" to "may not") but I'm just being picky.

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