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Rolling 8 covered call options on Solana crypto coin - potential income - 2.8% in 4 Days
On November 4, 2022, I rolled forward 8 covered call options on Solana crypto coin. A position I originally established a few days ago, on November 1, 2022, by investing $265.08 in 8 SOL coins.
I sold another 8 covered calls with the same strike price and expiry on November 5, 2022 (1 day). For this trade, I got 0.004*8 - 0.032 SOL / $1.02 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-5 NOV22-33-C sell 8 0.004
For this trade, I got a premium of 0.032 SOL (after commissions) or about 0.4% potential income return in just 1 day, if options expire worthlessly.
What happens next?
On the expiry date, November 5, 2022, SOL is trading under $33 per coin - options expire worthlessly and I keep the premium and start over - if SOL trades above $33 on the expiry date, I pay the difference in crypto. Say SOL trades $33.5 on expiry, I need to pay the difference between the spot price and strike price, which is $0.5, or converted it back to SOL which would equal 0.01515 SOL.
I would be left with 8+0.104+0.072+0.016+0.032-(0.01515*8) = 8.1028 SOL
As my initial investment was worth $265.08, my SOL worth would be $271.44 now. I would make $6.36 or about 2.39% dollar return on investment in four days
In case SOL trades $34 on expiry, I need to pay the difference between the spot price and strike price, which is $1, or converted it back to SOL which would equal 0.0303 SOL.
I would be left with 8+0.104+0.072+0.016+0.032-(0.0303*8) = 7.9816 SOL
As my initial investment was worth $265.08, my SOL worth would be $271.37 now. I would actually make $6.29 or about 2.37% dollar return on investment in 4 days
For this current position, it seems it would be best if the SOL price would stay above my bought price but under the strike price, so I could roll this trade for a few more couples of days.
Break-even: 265.08/(8+0.104+0.072+0.016+0.032)= $32.23
Depending on the market situation I would choose either to roll up and forward this position or cash it out, for that, I would need to transfer my coins back to Coinbase and sell them for FIAT.
Interested to learn more? I'm offering paid - online live course Selling Covered Call Options on Crypto (BTC/ETH/SOL)