Sold 10 covered call options on Solana coin - potential income - 1.2% in 4 Days

On October 3, 2022, I bought 10 Solana coins on Coinbase and simultaneously sold 10 call options on them at the Deribit trading platform, with an expiry set this Friday, October 7, 2022. For this trade, I got a premium of 0.012 / SOL / $3.86 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

Here is the trade setup:

• Bot 10 SOL $32.23

• SOL-7OCT22-34-C sell 10 0.012

For this trade, I got a premium of 0.012 SOL (after commissions) or about 1.2% potential income return in 4 days, if options expire worthlessly.

What happens next?

On the expiry date, October 07, 2022, SOL is trading under $34 per coin -  options expire worthlessly and I keep the premium and start over - if SOL trades above $34on the expiry date, I pay the difference in crypto. Say SOL trades $35 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 10+0.12-(0.0286*10) = 9.834 SOL

As my initial investment was worth $323.82, my SOL worth would be $344.19 now. I would actually make $20.37 or about 6.29% potential income return despite I would lose a few coins.

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)