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Rolling Up a Covered Call on Ethereum Crypto Coin
On March 20, 2023, I rolled up 1 covered call on Ethereum crypto coin, a position I originally established at the start of March, see: Sold Call Options on crypto Ethereum - potential income of 1.85% in 7 days
I rolled because my strike price of $1,600 was touched and challenged. I keep rolling this position ever since I opened it at $1,450. With this roll, I only rolled up the strike price from 1,600 to 1,700 but not rolled forward.
Also, I should note - I actually don't have 1 ETH, just 0.6962 ETH, which equals $973.92 at the time of writing.
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:
BOT 1 ETH APR 28 '23 1600 Call Option 0.1295 ETH
SLD 1 ETH APR 28 '23 1700 Call Option 0.0950 ETH
Here I bought back April 28, 2023 expiry call option paying 0.1295 ETH, and sold a new call option with the same expiry receiving 0.0950 ETH (before commissions)
What happens next?
On the expiry date, April 28, 2023, ETH is trading under $1,700 per coin - the call option expires worthlessly and I keep the premium and start over - if ETH trades above $1,700 on the expiry date, I pay the difference in crypto.
Say ETH trades $1,850 on expiry, I need to pay the difference between the spot price and strike price, which is $150, or converted it back to ETH which would equal 0.0882 ETH.
I would be left with 0.69+0.0185-0.0345+0.0395-0.0625+0.06-0.1295+0.095-0.0882= 0.5883 ETH
Converted back to USD = $1,088.35
Despite I would lose on crypto itself I would gain in dollar terms.
In the case of ETH trading $2,000 on the expiry, I need to pay the difference between the spot price and strike price, which is $300, or converted it back to ETH would equal 0.1764 ETH.
I would be left with 0.69+0.0185-0.0345+0.0395-0.0625+0.06-0.1295+0.095-0.1764= 0.5001 ETH
Converted back to USD = $1,000.2
Nevertheless, I will try to roll up and away for credit if challenged.
The best outcome for this trade is if Ethereum trades under $1,700 on the expiry, in such case I'm left with 0.6765 ETH, or lose -0.0197 ETH in 55 days.
My plan is to grow this Ethereum portfolio to at least 1 ETH or $2,000 in a foreseeable future (May / June 2023) and I'm seriously considering getting there with the help of writing call options + depositing some small bits into the crypto once in a week using the so-called dollar cost averaging.
Interested to learn more about trading crypto options? I'm putting together an online course Crypto Options Trading Strategies, feel free to pre-enroll!