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Market quotes are in bold.
[Poloniex BTC@00.00][Bitfinex BTC@00.00]
No opportunity, system 100% cash, no market risk. Balance on Poloniex: 1000.00 USD, 0.0000 BTC Balance on Bitfinex: 1000.00 USD, 0.0000 BTC
[Poloniex BTC@90.00][Bitfinex BTC@10.00]
Opportunity ($20.00 spread): system 0% cash, but still no market risk since long/short. Balance on Poloniex: 0.00 USD, 3.4483 BTC (buy for $1000.00) Balance on Bitfinex: 0.00 USD, -3.2258 BTC (short sell with $1000.00)
Now the Bitcoin market plummets, but the $20.00 spread is still here.
[Poloniex BTC@80.00][Bitfinex BTC@00.00]
There is still a spread. No action taken. Balance on Poloniex: 0.00 USD, 3.4483 BTC (long) Balance on Bitfinex: 0.00 USD, -3.2258 BTC (short)
Now the spread closes:
Situation 4 [Poloniex BTC@00.00][Bitfinex BTC@00.00]
Exit opportunity: we close the long and short positions. Balance on Poloniex: 689.66 USD, 0.0000 BTC Balance on Bitfinex: 1354.84 USD, 0.0000 BTC
Before the opportunity we had $2000.00 in cash and now we have $2044.50. So even though during the trade the market lost 33%, we made a 2.2% profit (trading fees not considered).