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#1 Sold 2 Call Options on Ethereum + hedging with Futures - potential income of 1.87% in 8 Days
On December 8, 2022, I sold 2 call options on Ethereum cryptocurrency with an expiry set in the next 8 days (December 16, 2022)
For this trade, I got a premium of 0.0374 / ETH / $46.71 at the time of writing
With this trade, I'm scaling up my trade size with crypto. Besides scaling up I'm also scaling down the trade frequency. From now on I’m focusing on weekly expiry trades.
Fewer trades should help to focus on adjustments and improve overall returns.
Selling crypto options is pretty much the same as selling stock options, except they are settled in crypto, require much less capital, are settled European style (cannot be assigned before the expiry), and can go totally wrong.
This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset
Here is the trade setup:
ETH-16DEC22-1300-C sell 2 0.019
Additionally, I opened a price-triggered buy signal, looking to go long (buying) with 1 ETH if the price touches $1,300.
For this trade, I got a premium of 0.0374 ETH (after commissions) or about 1.87% potential income return in just 8 days, if options expire worthlessly.
What happens next?
On the expiry date, December 16, 2022, ETH is trading under $1,300 per coin - options expire worthlessly and I keep the premium and start over - if ETH trades above $1,300 on the expiry date, I pay the difference in crypto. Say ETH trades $1,400 on expiry, I need to pay the difference between the spot price and strike price, which is $100, or 0.0769 ETH if converted back to crypto
I would be left with 0.0374-(2*0.0769) = -0.1164 (-$162.96)
But, as I'm planning to enter long trade with ETH futures if the price of $1,300 is touched. In case I will be able to enter the trade at $1,300 and the strike price reaches $1,400.. I will actually make 0.0769 ETH in the long future.
In theory - this is a zero-risk trade, in practice - it will ask very reliable execution plan if the $1,300 gets challenged.
P.S. Shout me back if you have any questions regarding crypto trades or if you would want just to talk :)