Sold Call on Ethereum + hedging with Futures - potential income of 0.32% in 2 Days

On December 6, 2022, I sold 1 a naked call on Ethereum cryptocurrency with an expiry set in the next 2 days (December 8, 2022)

For this trade, I got a premium of 0.0032 / ETH / $4.01 at the time of writing

Selling crypto options is pretty much the same as selling stock options, except they are settled in crypto, require much 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:

• ETH-8DEC22-1300-C sell 1 0.0035

Additionally, I opened a price-triggered buy signal, looking to go long (buying) with 1 ETH if the price touches $1,300

For this trade, I got a premium of 0.0032 ETH (after commissions) or about 0.32% potential income return in just 2 days, if options expire worthlessly.

This is more like a test trade, testing my idea of hedging with futures before scaling up 5-10 times.

What happens next?

On the expiry date, December 8, 2022, ETH is trading under $1,300 per coin -  options expire worthlessly and I keep the premium and start over - if ETH trades above $1,300 on the expiry date, I pay the difference in crypto. Say ETH trades $1,400 on expiry, I need to pay the difference between the spot price and strike price, which is $100, or 0.0769 ETH if converted back to crypto

I would be left with 0.0032-0.0769 = -0.0737 (-$103.18)

But, as I'm planning to enter long trade with ETH futures if the price of $1,300 is touched. In case I will be able to enter the trade at $1,300 and the strike price reaches $1,400.. I will actually make 0.0769 ETH in the long future.

In theory - this is a zero-risk trade, in practice - it will ask very reliable execution plan if the $1,300 gets challenged.

P.S. Shout me back if you have any questions regarding crypto trades or if you would want just to talk :)

Trade safe!