Author Topic: We should all be force settling for profits: A how to guide  (Read 1388 times)

0 Members and 1 Guest are viewing this topic.

Offline merivercap

  • Hero Member
  • *****
  • Posts: 661
    • View Profile
    • BitCash
Re: We should all be force settling for profits: A how to guide
« Reply #30 on: December 02, 2015, 10:17:03 am »
[member=32670]merivercap[/member]  -- I actually agree with your points, thanks for articulating them

1)The concept of BitUSD is unusual to someone that is used to just showing up on polo (or where ever) and knowing that they bought/sold in USD. The concept that USD trades for more in the DEX than on polo does sound weird, and can make inter-exchange arbitrage harder to do (or will make you lose money if you do it blindly). The plus side is that if you accumulate $10 million USD on polo, good look trying to get that out in one shot. If you accumulate $10 million in bitUSD, the blockchain will happily cash you out whenever you ask for it. Maybe you're right, maybe marketing bitUSD as "premium" USD or USD++ will be a better indicator to new users that something is different about them, and what the benefits of having them are so they are willing to pay a premium for them (especially since it's possible they will cash them out for more than 1 USD at the end as well)

2) I do agree that incentives to go short aren't as clear. I wrote a post before bitshares 2 was released: "Why would anyone short in BitShares 2.0?" I seriously asked the question, because I couldn't figure out the answer mathematically right away. It comes down to the requirement that bitshares is profitable and will gain in value of the smartcoin in the long term. You short for long-term gain... also kind of counter intuitive, and also risky

Thanks [member=3464]maqifrnswa[/member] .  It's good to know I'm not just talking to myself all the time. lol  Yeah I remember we had discussions some time ago about these issues.

1)  I agree.  It would be good to have a bitUSD close to other exchanges so there can be arbitrage.  Also the dollar/bitUSD exchange for consumers on the street will have a large influence on trading and that should trend towards 1:1 aside from the fee, because the natural inclination for consumers should be that 1 bitUSD is equal to a dollar.   It's fine to have an additional bitUSD Premium version and then people will know, but the  bitUSD regular version will make more sense overall.

2)  Yeah in bull markets there will be shorts if there aren't better alternatives for leveraged BTS, but assuming a random walk/flat market or bear market it's too risky to be a short in the long run because the odds are stacked against them.

Anyways I don't think we have to change much other than simplifying a bit and turning off forced settlement and using the price feed for margin call settlement, but we can always create two versions to experiment for those that want forced settlement.  I don't think there are many other major differences in opinion on parameters so we don't have to create too many versions.    We can also use dev shares for experimentation as someone has mentioned...
BitCash - http://www.bitcash.org 
Beta: bitCash Wallet / p2p Gateway: (https://m.bitcash.org)
Beta: bitCash Trade (https://trade.bitcash.org)

Offline Helikopterben

  • Sr. Member
  • ****
  • Posts: 202
    • View Profile
Re: We should all be force settling for profits: A how to guide
« Reply #31 on: December 02, 2015, 03:15:20 pm »
No one said you will always make money force settling so your offer doesn't prove anything, but maybe your main point is that you have done your due diligence and that you are shorting.   That gives me a good opportunity for me to learn something. Why did you short the illiquid gold market?  What price feeds does this market use? Is this roughly $75 order a test case?  Are you looking to make money?  Seriously curious.

Where did I say the money was guaranteed.  Sometimes I feel like I'm the only one with trading experience around here.  Its about a $243 order, not $75.  Here is my logic.  I believe bts is at or near an all-time low.  The absolute most I can lose is 0.25 gold (~$262 or 80,000 bts at current prices).  I am highly collateralized and my call price is 1,204,868 bts/gold.  My asking price of 400,000 is ~ 15% above settlement.  You would pay about 400,000 bts (~$1280) in a round trip trade for 1 ounce of physical gold, which is also comparable in security or at least potential security of bitshares.  This goes along with my theory that smartcoins will be more popular for physical commodities than fiat.  In other words, if you believe security of the bitshares system to be comparable to the security of owning physical gold directly, then generally any price below a 15% premium in bitgold is a better deal than physical gold.

Yes this is mostly a test case, but I will gladly accept the peanuts if I make them.  This trade seems like a no-brainer to me.  I will keep you posted. 

Quote
You'd be adding another force settlement feature just like Alt suggested and that will balance the market more, but like I said in the other thread that will introduce unpredictability to long term bitAsset holders in addition to shorts so you'll have less liquidity on both sides.  You'll probably have a real powerful manipulation tool as well.  The ideal scenario is that you have long term bitAsset holders and long term bitAsset shorters that don't have to be forced out of their positions unless undercollateralized.

I'm not sure what other forced settlement feature you are talking about other than the current forced settlement feature. 

Offline merivercap

  • Hero Member
  • *****
  • Posts: 661
    • View Profile
    • BitCash
Re: We should all be force settling for profits: A how to guide
« Reply #32 on: December 02, 2015, 10:24:52 pm »
Where did I say the money was guaranteed.
  It was implied when you offered me to take on a force settlement trade at a loss.

Sometimes I feel like I'm the only one with trading experience around here.
  Now are you implying I don't have trading experience? 

  Its about a $243 order, not $75. 
   Yes that was my mistake.... I just picked out the wrong order in the order book...

Here is my logic.  I believe bts is at or near an all-time low. 
  It's still a speculation.  Mastercoin is around $1m market cap and Counterparty is around $2m. (I'm optimistic, but it's still speculative)

The absolute most I can lose is 0.25 gold (~$262 or 80,000 bts at current prices).  I am highly collateralized and my call price is 1,204,868 bts/gold.  My asking price of 400,000 is ~ 15% above settlement.  You would pay about 400,000 bts (~$1280) in a round trip trade for 1 ounce of physical gold, which is also comparable in security or at least potential security of bitshares.  This goes along with my theory that smartcoins will be more popular for physical commodities than fiat.  In other words, if you believe security of the bitshares system to be comparable to the security of owning physical gold directly, then generally any price below a 15% premium in bitgold is a better deal than physical gold.
Yes this is mostly a test case, but I will gladly accept the peanuts if I make them.  This trade seems like a no-brainer to me.  I will keep you posted. 
   
What do you feel about trading in an illiquid market and do you have concerns about that?   Is your order for .23 or .25 gold?  I see the .23 gold order at 400k. 

So you are comparing the cost of physical gold to bitShares as a store of value?  Interesting way to look at it.  I always thought there would be a consistent float of bitUSD & bitGold for payments and as a store of value, but if it was just strictly for a store of value, the value of the BTS DAC would not generate transaction fee revenue so you are valuing it more like Bitcoin and the value that the ecosystem has in securing itself.  However without payment transaction fees that validate the value of a company or DAC, where would the DAC derive it's value?  Bitcoin has the same issue because if people don't use it for payments, how can it be used as a store of value?  I have an answer to this and there are a few potential answers, but curious to know what others think.   

Also a hypothetical question re: SQP.  I was curious what your thoughts were about the SQP.  If there were no SQP in the initial design of 50% (now around 10%) even if you had executed your order with plenty of collateral I assume if someone had walked the book down to zero by buying all the bids, you and the rest of the 6.3 oz shorts would be forced out.   Is that your understanding or am I missing something?   (I understand there will be fork to make use of the feed price as protection and I'm not sure what will be of the SQP, but this is just a hypothetical question about how the system worked before and the dangers of illiquidity)

Quote
You'd be adding another force settlement feature just like Alt suggested and that will balance the market more, but like I said in the other thread that will introduce unpredictability to long term bitAsset holders in addition to shorts so you'll have less liquidity on both sides.  You'll probably have a real powerful manipulation tool as well.  The ideal scenario is that you have long term bitAsset holders and long term bitAsset shorters that don't have to be forced out of their positions unless undercollateralized.

I'm not sure what other forced settlement feature you are talking about other than the current forced settlement feature.

I misread your comment.  I thought you said shorts should be able to settle above the feed instead of just place relative orders above the feed.
BitCash - http://www.bitcash.org 
Beta: bitCash Wallet / p2p Gateway: (https://m.bitcash.org)
Beta: bitCash Trade (https://trade.bitcash.org)

Offline Helikopterben

  • Sr. Member
  • ****
  • Posts: 202
    • View Profile
Re: We should all be force settling for profits: A how to guide
« Reply #33 on: December 04, 2015, 10:49:34 pm »
What do you feel about trading in an illiquid market and do you have concerns about that?   

Liquidity in a market is relative.  There are opportunities in any market.  For instance, in this illiquid market, premiums are naturally higher, giving a potentially higher profit margin for the added risk.  Total profit/loss is lower in an illiquid market, but capital requirements are lower also.  In a liquid market, premiums may be thin but less risky and you may be able to play with larger amounts of money but margins will be lower. 

Quote
Is your order for .23 or .25 gold?  I see the .23 gold order at 400k.
My order was for .23 but I have debt of .25.

Quote
So you are comparing the cost of physical gold to bitShares as a store of value?  Interesting way to look at it.  I always thought there would be a consistent float of bitUSD & bitGold for payments and as a store of value, but if it was just strictly for a store of value, the value of the BTS DAC would not generate transaction fee revenue so you are valuing it more like Bitcoin and the value that the ecosystem has in securing itself.  However without payment transaction fees that validate the value of a company or DAC, where would the DAC derive it's value?  Bitcoin has the same issue because if people don't use it for payments, how can it be used as a store of value?  I have an answer to this and there are a few potential answers, but curious to know what others think.   

Bitgold can be used as a store of value, trading instrument, payment vehicle, or potentially many other uses, just like bitcoin.  It will provide value to the DAC through transaction fees.

Quote
Also a hypothetical question re: SQP.  I was curious what your thoughts were about the SQP.  If there were no SQP in the initial design of 50% (now around 10%) even if you had executed your order with plenty of collateral I assume if someone had walked the book down to zero by buying all the bids, you and the rest of the 6.3 oz shorts would be forced out.   Is that your understanding or am I missing something?   (I understand there will be fork to make use of the feed price as protection and I'm not sure what will be of the SQP, but this is just a hypothetical question about how the system worked before and the dangers of illiquidity)

SQP can only help out the short seller by not forcing them to sell near 0.  10% below feed seems ideal to me.  It should be enough to avoid a black swan by giving buyers a 10% discount on margin called orders.  It is the short seller's responsibility to maintain collateral.


Update:  The trade was executed for a small portion at 400,000 and then I rebought the gold at 350,000. 



Profit of about 560 bts after fees.  Not much but I just wanted to demonstrate what is possible with a real example.  Shorts can make money and if maker/taker and/or rebates are implemented then it will provide more incentive for shorts and likely reduce spreads.  Note the entire round-trip trade was done above spot(feed). 

Offline tonyk

  • Hero Member
  • *****
  • Posts: 3309
    • View Profile
Re: We should all be force settling for profits: A how to guide
« Reply #34 on: December 04, 2015, 11:12:41 pm »
One of my favorite threads in a while.

And while no one really came up with an idea how to place a market order 24h in a future...and also profit from such action impulse... The title is somewhat good!

....
I think one da,y there might be a bot counting the idiots on this and other threads like it...and come up with corresponding investing strategy.

And as I find my self worthy of inclusion in said analyses...there was my post.
Lack of arbitrage is the problem, isn't it. And this 'should' solves it.