Covered Call

Covered Call

Understanding a 'Covered Call' in Crypto Option Trading

The term 'Covered Call' is a commonly used phrase in the realm of option trading with cryptocurrencies. It is a strategy where the holder of the cryptocurrencies sells call options against their holdings. This serves a dual purpose of generating income, usually in the form of a premium, and potentially offloading the owned coins if the price rises and they get called away.

Breaking Down a 'Covered Call'

The term 'Covered Call' breaks down essentially into two parts: 'Covered' and 'Call'. 'Covered' in this context means you already own the cryptocurrencies. 'Call' refers to the financial contract, or option, that gives the call option buyer the right, but not the obligation, to buy a certain amount of cryptocurrency at a set price, called the 'strike price', within a specific period.

How a 'Covered Call' works

In a 'Covered Call' strategy, you, as the trader, sell a call option against the cryptocurrencies you hold. You receive a premium from the buyer of the call option. This premium is yours to keep, regardless of future price movements. However, if the price of the cryptocurrency exceeds the strike price, the buyer of the call option has the right to buy your cryptocurrencies at the strike price, thus potentially requiring you to sell your holdings at below-market value.

Why Employ a 'Covered Call' Strategy?

This strategy is used when you have a neutral view on the market and believe that the price of the cryptocurrency will remain relatively stable or may decrease slightly. The premium collected from selling a 'Covered Call' can help buffer some potential loss if the price falls. Another key benefit is income generation- as you receive premium payments from selling the option, regardless of whether it gets exercised or not.

Key Risks with 'Covered Calls'

Like any investment strategy, 'Covered Call' option trading isn't risk-freeness. The risk lies when the price of the cryptocurrency surges. Remember, if the price exceeds the strike price, the buyer of the call option can buy your cryptocurrencies at the strike price. Therefore, you could miss out on potential profits if the price skyrockets and the buyer exercises their call option.


'Covered Calls' can be a viable option trading strategy in the cryptocurrency space, especially for generating extra income or for trying to hedge against slight price declines. As with any trading strategy, it's essential to understand how 'Covered Calls' work, their potential benefits, and their risks, before diving in.

Blog Posts with the term: Covered Call

A Beginner's Guide to Options Trading in Crypto

The world of cryptocurrencies is not limited to buying and holding coins hoping for a profitable surge. Amongst the diversely...


Profitable Option Trading Strategies for Every Investor

Option trading strategies offer a range of tools for investors to navigate the financial markets. Whether you’re looking to generate...


Deciphering the Future: Top Options Trading Strategies for 2023

In recent years, the world of finance has been shaken by the rapid emergence and growth of cryptocurrency as a...


The Ultimate Option Trading Course: Comprehensive and In-Depth

Embarking on an option trading full course can be a transformative educational journey, offering you the keys to unlocking the...


Choosing the Right Crypto Option for Your Investment Needs

Delving into the world of cryptocurrency can be exhilarating, but also complex, especially when it comes to derivatives like crypto...


Trading Crypto Options in the USA: A Comprehensive Guide

Crypto options hold a unique position within the world of financial trading. As an innovative form of investment, they are...


Exploring Option Trading in the US Market

Exploring option trading in the US market opens up a world of possibilities for investors and traders alike. With a...


Crypto Options Unveiled: Strategies for Every Market Condition

In the ever-evolving digital world, cryptocurrencies have emerged as a leading player in the global financial market. But for many,...


Option Trading for Dummies: A Beginner's Guide

Welcome to the world of option trading, a domain that can enhance your investment strategy with flexibility, diversification, and control....


Crypto Options Strategies: Mastering the Art of Volatility

Crypto Options Strategies: Mastering the Art of Volatility Crypto options are rapidly gaining traction among crypto enthusiasts, traders, and investors alike...


Option Trading in Canada: The Ultimate Guide to Success

Option trading in Canada involves buying and selling options contracts, which are financial instruments providing the right, but not the...


Exploring the Pros and Cons of Crypto vs Options Trading

When first stepping into the world of online trading, you might encounter a multitude of financial instruments, each with its...


Making Sense of Cryptocurrency Options

In an ever-evolving financial landscape, one niche area that's receiving substantial interest is cryptocurrency options. The digital currency market is...


Unveiling the Power of Crypto Options Trading

Investing in cryptocurrencies has been significantly gaining attention over the years. As various digital assets like Bitcoin, Ethereum, and many...


Discover the Best Option Trading Youtube Channels for Expert Tips and Strategies

Embarking on the journey of option trading can be complex and overwhelming, particularly for beginners. With the digital age, a...