Don't know how reliable it is or who the owner is, but I used it yes, to short a little bitcoins from $98 as a hedge for the main position. It worked as expected (i.e, margin call when prices moved above 140
).
Yup, leverage is a bitch. Now if the exchange rate drops back down below $98 you have no hedge left and have direct exposure again.
Simply sell your BTC, and pretend you're going long the dollar.
If you are going to do that and don't need the cash right now ... there is a high level of contango so that gives a way to sell and lock in a certain exchange rate.
So let's say using the example above BTC/USD was $90 and BUM3 (June 14th 2013 settlement) was $98 as you said. With 1 BTC to short, you could sell 10 BUM3 contracts and essentially have essentially zero exposure to margin call.
So let's say BTC/USD on June 14th is $140. You then have about 0.7 BTC remaining on June 14th but the exchange rate at that time is $140 so you can sell those 0.7 BTC and get $98. But if the exchange rate drops to $70, you then have a little over 1.4 BTC, which at BTC/USD $70 can be sold for ... $98.
So instead of selling today at the spot market you can sell futures contracts and gain a nice little profit from contango.
