Sold 8 covered call options on Solana crypto coin - potential income - 1.3% in 1 Day

On November 1st, 2022, I bought 8 Solana coins on Coinbase and simultaneously sold 8 call options on them at the Deribit trading platform, with an expiry set for tomorrow, November 2, 2022. For this trade, I got a premium of 0.013 per coin or 8*0.013 = 0.104 / SOL / $3.41 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.

This trade is more like an experiment, trying to squeeze extra juice from the cash sitting in your bank account. In short, I plan to spend about EUR 260 this Friday for buying 1 Amzn stock purchases and looking to send EUR 150 to my mom. As there are a few more days, I decided to see, if can I use this money and these few days to earn some additional capital.

I transferred EUR 265 from my bank account to Coinbase and bought 8 SOL coins paying EUR 33.13 per coin / EUR 265.04. Additionally paid EUR 1.59 and EUR 0.36 fees. Total investment EUR 266.99 / USD 265.08

Here is the trade setup:

• Bot 8 SOL $32.89

• SOL 2 NOV 22-33-C sell 8 0.013

For this trade, I got a premium of 0.104 SOL (after commissions) or about 1.3% potential income return in just 1 day, if options expire worthlessly.

What happens next?

On the expiry date, November 2, 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-(0.01515*8) = 7.9828 SOL

As my initial investment was worth $265.08, my SOL worth would be $267.42 now. I would actually make $2.34 or about 0.88% return on investment in just one day

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-(0.0303*8) = 7.8616 SOL

As my initial investment was worth $265.08, my SOL worth would be $267.29 now. I would actually make $2.21 or about 0.83% return on investment in just one day

For this current position, it seems it would be best if the SOL price would stay above my bought price but above the strike price, so I could roll this trade for a few more couples of days.

Despite the promising daily returns, bank transfer and Coinbase fees seem a bit too high to justify such short trades in the future, on the other hand the trade is quite Okay if we are ready to roll for more days / weeks

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)