How Does a Covered Call Strategy Utilize Options and an Underlying Crypto Asset?
A covered call is an options strategy where an investor holds a long position in a crypto asset (e.g. Bitcoin) and simultaneously sells (writes) a call option on that same asset.
The 'cover' is the underlying asset, which can be delivered if the option is exercised. The goal is to generate income from the option premium while limiting potential upside gains.
Glossar
Option Premium
Cost ⎊ The Option Premium represents the initial cost paid by the buyer to acquire the right conveyed by the contract, functioning as the price for risk transfer.
Covered Call Strategy
Mechanism ⎊ A covered call strategy, within cryptocurrency derivatives, involves holding an underlying asset while simultaneously selling a call option on that same asset, generating premium income.
Covered Call
Strategy ⎊ This involves selling a call option on an asset that the investor already owns, thereby generating immediate income against potential appreciation.