Discover more from Covered Calls with Reinis Fischer
Sold 6 covered call options on Solana crypto coin - potential income - 7% in 20 Days
On November 5, 2022, my 8 call options with Solana expired in the money. I decided to take some small profit, by selling off a few coins and rolling up and forward just the remaining SOL coins.
I have been in this position for 4 days, since November 1, 2022, by investing $265.08 in 8 SOL coins.
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
During the past 4 days, I have received 0.222 SOL from the options premium. Today Solana reached my strike price of $33 which expired at $35.08. As crypto options are settled in crypto itself, I had to pay the difference between my strike price and the spot price in crypto (35.08-33=$2.08) or 0.0625 per coin.
I was left with 8+0.222-(8*0.0625) = 7.724 SOL / with the new price of $35.08 on the expiry - that gives me the actual value of my investment = $270.88. Or $5.8 profit in 4 days.
I decided to take just s small profit by selling 1.724 SOL and keep rolling this position forward with 6 SOL coins.
Sold 1.724 SOL for $60 / or about $34.80 per SOL.
My new investment value equals $205.08 for 6 SOL coins, with an average buy price of $34.18
Here is the trade setup:
SOL-5 NOV22-33-C buy 8 0.0625
Sold 1.724 SOL 34.80
SOL-25 NOV22-35-C sell 6 0.07
For this trade, I got a premium of 0.042 SOL (after commissions) or about 0.4% potential income return in just 1 day, if options expire worthlessly.
In this trade I was paying 0.5 SOL (8*0.0625) to close $33 strike, additonally I sold 1.724 SOL for $60 (34.8*1.724) and also sold 6 more covered calls with at strike price 35, expiry on Novebmer 25, for this trade I got a premium of 0.42 SOL (6*0.07)
What happens next?
On the expiry date, November 25, 2022, SOL is trading under $35 per coin - options expire worthlessly and I keep the premium and start over - if SOL trades above $35 on the expiry date, I pay the difference in crypto. Say SOL trades $36 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 0.0286 SOL.
I would be left with $60 and 6+0.42-(0.0286*6) = $60 and 6.2484 SOL
As my initial investment was worth $265.08, my SOL worth would be $284.94 now. I would make an additional $19.86 or about 7.49% dollar return on investment in 24 days
In case SOL trades $40 on expiry, I need to pay the difference between the spot price and strike price, which is $5, or converted it back to SOL which would equal 0.1428 SOL.
I would be left with $60 6+0.42-(0.1428*6) =$60 and 5.5632SOL
As my initial investment was worth $265.08, my SOL worth would be $282.40 now. I would actually make $17.32 or about 6.53% dollar return on investment in 26 days
Break-even: 205.08/(6+0.42)= $31.94
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)