Rolling 10 covered call options on Solana coin - potential income - 5.9% in 25 Days

On October 21, 2022, I rolled down 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.

As Solana's price dipped shortly before the expiry under $28, I decided to go with a more aggressive approach and sold near-the-money strike calls options + also bought long call options, in case there is a sharp recovery I will be able to enjoy the ride.

As this contract expired, I sold 10 new contracts with lower strike prices, with the expiry set for next Friday, October 28, 2022. For this trade, I got a premium of 0.14 / SOL / $3.94 at the time of writing

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 sell 10 0.022

• SOL-28OCT22-31-C buy 10 0.008

For this trade, I got a premium of 0.14 SOL (after commissions) or about 1.4% potential income return in 7 days, if options expire worthlessly.

What happens next?

On the expiry date, October 28, 2022, SOL is trading under $29 per coin -  options expire worthlessly and I keep the premium and start over - if SOL trades above $29 on the expiry date, I pay the difference in crypto. Say SOL trades $30 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 0.0333 SOL.

I would be left with 10+0.12+0.18+0.15+0.14-(0.0333*10) = 10.25 SOL

As my initial investment was worth $323.82, my new SOL worth would be $307.5 now. In dollar terms, I would lose -$16.57 but I still would make 0.25 SOL coins

In case SOL trades $31 on the expiry date, I will need to pay the difference between the spot price and strike price, which is $2, or if converted back to SOL would equal 0.0645 SOL.

I would be left with 10+0.12+0.18+0.15+0.14-(0.0645*10) = 9.945 SOL

As my initial investment was worth $323.82, my new SOL worth would be $308.29 now. In dollar terms, I would lose -$15.53, and also I would lose 0.055 SOL

Last, but not least In case SOL trades $32 on the expiry date, I will need to pay the difference between the spot price and strike price, which is $2, if converted back to SOL would equal 0.0645 SOL. But as I have long call options available I will gain $1 or 0.03

I would be left with 10+0.12+0.18+0.15+0.14-(0.0645*10)+(0.03*10) = 10.24 SOL

As my initial investment was worth $323.82, my new SOL worth would be $327.68 now. I would make small but profit already

Break-even: 323.82/(10+0.12+0.18+0.15+0.14)= $30.57

Interested to learn more? I'm offering paid - online live course Selling Covered Call Options on Crypto (BTC/ETH/SOL)