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Rolling 10 covered call options on Solana crypto coin - potential income - 6.07% in 39 Days
On October 28, 2022, I rolled up and forward 10 covered call options on Solana crypto coin. A position I originally established on October 3, 2022, investing $322 in 10 SOl coins.
For today’s expiry my strike price was $29, and on the expiry Solana traded at $30.27, as options with crypto are settled in crypto itself, I let them expire in the money and paid the difference 0.0413*10 = 0.413 SOL.
I sold another 10 covered calls with a higher strike price and expiry on November 11, 2022 (14 days). For this trade, I got 0.043*10 - 0.43 SOL
The aftermath of this trade: 0.017 SOL / $0.51 at the time of writing
As Solana's price recovered from under $28 to above $30, I also rolled up my strike price from $29 to $31, which is already closer to my opening price ($32.2)
Selling crypto options is pretty much the same as selling stock options, except they are settled in crypto, require 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:
SOL-28OCT22-29-C buy 10 0.0413
SOL-11NOV22-31-C sell 10 0.043
Here I bought back October 28 call options with a strike price of $29, paying 0.0413 SOL, and additionally sold November 11 call options with a higher $31 strike price, for which I received a premium of 0.043. Aftermath of this trade: + 0.017 SOL (about 0.17% in 14 days, if options expire worthlessly
What happens next?
On the expiry date, November 11, 2022, SOL is trading under $31 per coin - options expire worthlessly and I keep the premium and start over - if SOL trades above $31 on the expiry date, I pay the difference in crypto. Say SOL trades $32 on the expiry date, I will need to pay the difference between the spot price and strike price, which is $1, or if converted back to SOL would equal 0.03125 SOL.
I would be left with 10+0.12+0.18+0.15+0.14+0.017-(0.03125*10) = 10.2945 SOL
As my initial investment was worth $323.82, my new SOL worth would be $329.42 now. In dollar terms, I would gain some +$5.6 s
In case SOL trades $35 on the expiry date, I will need to pay the difference between the spot price and strike price, which is $4, or if converted back to SOL would equal 0.1142 SOL.
I would be left with 10+0.12+0.18+0.15+0.14-(0.1142*10) = 9.9448 SOL
As my initial investment was worth $323.82, my new SOL worth would be $348.06 now. In dollar terms, I would gain $24.24
Break-even: 323.82/(10+0.12+0.18+0.15+0.14+0.017)= $30.53
Interested to learn more? I'm offering paid - online live course Selling Covered Call Options on Crypto (BTC/ETH/SOL)