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MicahZoltu/insured_trading.md

Created August 31, 2019 15:04
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insured_trading.md

starting

  1. User has 10 ETH.
  2. User wants 10 ETH worth of an insured YES position.
  3. User buys 10 complete sets, giving them 10 YES + 10 NO + 10 INVALID.
  4. User trades 10 NO for x YES on the open market.
  5. User ends up with 10+x YES + 10 INVALID.
  • If the market resolves as YES, they get 10+x ETH (net profit == x).
  • If the market resolves as NO, they get 0 ETH (net loss == VAR).
  • If the market resolves as INVALID, they get 10 ETH (net neutral).

close at profit

  1. User has 10+x YES + 10 INVALID, they put in 10 ETH originally.
  2. User sells y YES for 10 NO on open market (where y < x).
  3. User sells 10 complete sets, giving them 10 ETH.
  4. User ends up with 10 ETH + (x-y) YES.
  • If the market resolves as YES, they end up with 10+x-y ETH (net profit == x-y).
  • If the market resolves as NO, they end up with 10 ETH (net neutral).
  • If the market resolves as INVALID, they end up with 10 ETH (net neutral).

close at loss

  1. User has 10+x YES + 10 INVALID, they put in 10 ETH originally.
  2. User sells y YES for 10+x-y NO on open market (where y > x).
  3. User sells 10+x-y complete sets, giving them 10+x-y ETH.
  4. User ends up with 10+x-y ETH + y-x INVALID.
  • If the market resolves as YES, they end up with 10+x-y ETH (net loss == y-x).
  • If the market resolves as NO, they end up with 10+x-y ETH (net loss == y-x).
  • If the market resolves as INVALID, they end up with 10 ETH (net neutral).
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