On December 13, 2022, I rolled up and forward 2 call options on Ethereum cryptocurrency with a new expiry set on December 13, 2022, and a new strike price of $1,350
Originally I started this trade on December 8, 2022. See: #1 Sold 2 Call Options on Ethereum + hedging with Futures - potential income of 1.87% in 8 Days
I decided to buy back existing call options as the long futures didn't do their job and despite I had configured to go long with futures if $1,300 is touched - I didn't have enough buying power to open this position and my trades were left uncovered.
If there is a lesson to learn - always keep some margin for safety.
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 buy 2 0.044
ETH-23DEC22-1350-C sell 2 0.0405
Additionally, I opened a price-triggered buy signal, looking to go long (buying) with 1 ETH Dec 23 Futures contract if the price touches $1,350.
The aftermath of this trade is -0.007 ETH / -$9.4, but as I originally started this trade last week with +0.038, I'm still left with some gain of 0.031 ETH (after commissions) or about 1.55% potential income return in 15 days, if options expire worthlessly.
What happens next?
On the expiry date, December 23, 2022, ETH is trading under $1,350 per coin - options expire worthlessly and I keep the premium and start over - if ETH trades above $1,350 on the expiry date, I pay the difference in crypto. Say ETH trades $1,500 on expiry, I need to pay the difference between the spot price and strike price, which is $150, or 0.11 ETH if converted back to crypto
I would be left with 0.031-(2*0.11) = -0.189 (-$283.5)
In case I will be able to enter the trade with long futures at $1,350 and the strike price reaches $1,500.. I will actually make 0.11 ETH from the long futures.
In theory - this is a zero-risk trade, in practice - it will ask very reliable execution plan if the $1,350 gets challenged. As of today, futures orders might not get filled because of the lack of funds.
P.S. I'm issuing TerraM crypto token for raising funds for covered call writing, if you would like to learn more shout me back or read my whitepaper here: Raising $10,000 capital for issuing Covered Call Crypto Fund (Solana blockchain)
Trade safe and talk soon!