There are no free lunches in the world of finance.

STEEM is no different. Although it might seem like buying a vote is _risk-free_ when you get a quoted "10%" return on whatever service you happen to use, keep in mind that 10% only _becomes real_ if the price of STEEM/USD stays the same and the current SBD/STEEM rate stays the same by the time your post pays out. What do I mean by this? Well, I certainly don't mean to imply that this risk is a bad thing or that bidders are getting taken advantage of here. This risk is just a part of life. Its the same as when an investor buys a company that exports alot of goods like AAPL, and now that investment has EUR/USD and JPY/USD exchange rate risk, for example. To put it another way, the more value (or rshares) that your posts accumulate, the more the expected payout of a post can fluctuate as exchange rates change. (Thats regardless of whether you use a bidbot or not)

Thus, buying a vote is like going long STEEM/USD.

But to really understand this, let's rewind a bit and start by figuring out how the network calculates the value of your post. Like everything else in STEEM, it all comes down to a formula: ((REWARD_POOL * NETWORK_STEEM_USD_RATE ) / RECENT_CLAIMS) * POST_RSHARES where REWARD_POOL is the current size of the reward pool NETWORK_STEEM_USD_RATE is the current value of the network STEEM/USD feed (i.e. the 3.5 day moving average the witness price feeds) RECENT_CLAIMS is the current value of network recent claims and POST_RSHARES is the current rshares on your post.

So how much do we lose (or make) when the price of STEEM/USD goes down (or up) by a penny???

To answer that, let's calculate the _sensitivity_ of the expected payout of one of my [recent posts](https://steemit.com/money/@marketstack/visualizing-alt-coin-correlation) According to [steemd.com](https://steemd.com/python/@marketstack/how-to-download-historical-price-data-from-binance-with-python) that post has 50,696,175,463,520 rshares. Also, right now [www.steemdb.com](www.steemdb.com) has the following values for: REWARD_POOL = 738041.738 NETWORK_STEEM_USD_RATE = 3.019 RECENT_CLAIMS = 4.5579684828326E+17 These values change over time, and its beyond the scope of this post to go into all of that. For the purposes of this example, however, let's assume REWARD_POOL and RECENT_CLAIMS stays constant. Now, we can calculate how much a $0.01 move in STEEM/USD would change the expected value of my post: ((738041.738 * 0.01) / 4.5579684828326E+17) * 50,696,175,463,520 which comes out to a change of $0.82 in post payout per $0.01 change in STEEM/USD. So, for example, if the price of STEEM/USD fell to $2.5 the value of the post would drop by about $42.558 (ouch!) On the other hand if the price rallied to $3.5 the value of the post would rise by $39.442. Thus, the more rshares your post is worth, the more sensitive the _value of the post_ becomes to the _network STEEM/USD rate_ Of course, figuring out the author's share of the calculated expected payout from a post is a little more complicated. Suppose a post is worth $100 according to the expected payout. Worst case scenario, 75% of this value goes to the author, i.e. $75 Then, to calculate the actual payout in SBD, we get $75 / 2.0 = 37.5 SBD. Thats the author's SBD payout. The SP is calculated is $75 / 2.0 = $37.5 / $3.019 = 12.42 SP. Thats the author's SP payout. So how does all of this expose you to SBD/STEEM rate risk when you buy a vote? Well, a typical bidbot transaction might go something like: 1) send 20 SBD to bidbot and 2) get $45 "dollar" upvote Remember this $45 isn't real dollars, and it gets split 75% / 25% between you and the curators, so the real value of the upvote _to you_ the author is: $45 * 0.75 = $33.75 Now this gets split in 2 to calculate the actual SBD and SP payouts: $33.75 / 2 = 16.875 SBD and $33.75 / 2 / $3.019 = 5.59 SP Which means that 20 SBD went _out_ and now only 16.875 SBD are coming back _in_. This results in a deficit of 3.125 SBD. That's where the SBD/STEEM exchange rate risk comes in. Suppose that the current SBD/STEEM rate is 1.22 (i.e. 1 STEEM buys 1.22 SBD) The 5.59 SP from the paid vote equals 6.819 SBD at this SBD/STEEM rate, which more than makes up for the deficit in SBD. The total return then in SBD is around 18% in this case. But suppose the SBD/STEEM rate goes to 0.8 (i.e. 1 STEEM buys 0.8 SBD), now the 5.59 SP from the paid vote is only equal to 4.472 SBD, so the return of the vote drops to 6.7% On the other hand if the rate goes to 1.8, the return jumps all the way to 34.7%! Thus, assuming all other factors stay the same, buying a vote puts you _short SBD vs STEEM_, that is you gain as the value of SBD declines against STEEM. Like everything else on STEEM, this has to be wildly complicated. But just like in traditional finance, there's returns to people who actually [read the rulebook](https://github.com/steemit/steem). Of course, this post only considers the risk presented from changes in exchange rates. We do not consider the ever present risk of getting downvoted [not a suggestion, just covering all bases] I've tried to make this as accurate as possible but given the amount of math involved errors may have crept into my work here... any correct corrections (lol) will be rewarded with love, and upvotes ;-)

https://steemitimages.com/DQmNThMVyakaybJ58chbgNQPXdL8neSuYs358KfrW1vNN3X/image.png

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