Is the loss guaranteed if we hold it for a long period of time??
I still don't understand why
Thats why:
It is clear that the risk & reward ratio between them is very high.
If we bet btcup, we only can win 20times, but if we bet btcdown we will lose 300times.
When trend will reverse and BTC will start to dump couple % daily being BTCdown will not gives your 300x. It will give you 30x while Btcup will be under x300 risk.
It is explained in the link you already provided:
https://www.binance.com/en/blog/421499824684901079/Why-you-shouldnt-hold-leveraged-tokens-longterm-"Leveraged tokens are built to multiply the underlying asset's daily return-the main component to remember here is DAILY. The leverage factor of a token will be reset every day. As a result, the performance of a token and its underlying asset can differ over the long term."
If BTC will dump 30% in one day you will lose 90% (100$ left from 1000$ investment). Next day BTC will do +50% (back where it was), you portfolio will do +150% from 100$ (250$). BTC recovered the dump but you are still 75% under water. In long run it sum up to be the worse long term product.
personally I understand this; having read the articles and all this is quite clear: I may need to study it a bit in depth, but the general picture I gues I got it.
Everything you need to know is in those articles. I don't know what you want to know more that you already know. What "doubts and questions" you have?
Despite all the warnings about the product (given in some cases by binance itself) the trade executed with no surprises,
There are always no suprises when your trade was short term and amin asset price was not volatile too much.
The most imporant thing with Leveraged Tokens - do not hold them. Its guarantee of loss.
My question was simply this:
is it all baked into price, isn't it?
Because after all, I am sure you'll agree with me, that's the only point that matters from a risk management point of view as a trader: being able to clearly define risk.
When you trade
leveraged futures for instance, your risk comes not only from the outcome of the price action, but also from the
margin and
liquidation settings. So in that case your risk is defined by your price action (stop loss ecc)
and by your margin, which of course you need to take always into serious consideration.
When you trade BLVT Leveraged Tokens on the other hand, my guess is that
you may even ignore what is happening under the price "engines": whether the leverage was rebalanced or not, whether you are paying a daily funding fee or whatever:
you don't care.
And why is that?
Because, once again, it's all baked into price, isn't it?
So once again
what defines risk is simply your
price action: that you can clearly observe on the chart and that you can effectively define by a simple...
stop-loss.
I don't know if I expressed clearly..
Let me give you another example: when you trade a
perpetual swap contract on
bitmex you pay or receive a periodic funding fee which occurs every 8 hours (shorts pay long or viceversa).
Now, this element is
not reflected into the asset price, but it is shown in a
dedicated item in your trading reports.
This means that funding fees are another element to take into account when defining risk other than price action, when trading swaps on bitmex.
That doesn't happen in BLVT, does it? Because once again it's all baked into price (or the NAV, as they call it, right?)
So this is my point / doubt: those mechanisms underlying BLVT price definition may even be complex and various but, as long as all this elements are expressed and reflected into one single element (which is price), you can always define your risk clearly and trade this asset as any other ordinary trading asset; and, most importantly: you can always define your risk by observing only one single element, which in this case is price action.
Not margin, not liquidation, not fees: you will observe and base upon price action and price action only.
Is this right?
