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Covered Call

You're sitting on 1 BTC at 95,000. You think it's going sideways for a few weeks. Maybe it grinds up to 98k, maybe it chops around 93k. Instead of watching your position do nothing, you sell a call against it and collect 2,800 in premium. That's a covered call.

You give up some upside. You get paid now. If BTC stays below your strike, you keep every dollar of that premium and still hold your coin.

What You Do​

The SetupYou receive premium
Ownthe underlying asset (e.g., 1 BTC)
Sell1 call at a strike above the current price
Max Profit
(K - entry) + prem.
Max Loss
Entry - premium
Breakeven
Entry - premium
Margin
Hold underlying or equivalent collateral

How the P&L Works​

Three zones. Know which one you're in.

  1. Below your entry. You're losing on the spot position. The premium gives you a thin cushion, but you still carry full downside. If BTC drops from 95k to 80k, that 2,800 in premium doesn't feel like much.
  2. Between entry and strike. The sweet spot. You profit from BTC appreciation AND keep the premium. This is the zone you're betting on.
  3. Above the strike. Gains are capped. The short call offsets every dollar BTC moves above the strike. You made (strike - entry) + premium, but that's the ceiling. BTC rips to 120k? You don't participate past the strike.

Worked Example​

You hold 1 BTC bought at 87,200. You sell the 95,000 call expiring in 18 days for 2,800. At 65% IV on a 21-day BTC option, that's a 25-delta call collecting roughly 3% of the underlying.

BTC at Expiry
Spot P&L
Call P&L
Total P&L
$78,000
-$9,200
+$2,800
-$6,400
$84,400
-$2,800
+$2,800
$0
$87,200
$0
+$2,800
+$2,800
$95,000
+$7,800
+$2,800
+$10,600
$110,000
+$22,800
-$12,200
+$10,600

Above 95k, total P&L locks at +10,600 no matter how far BTC runs. That's the trade-off. If you sell covered calls long enough, you will eventually miss a face-ripper. Comes with the territory.

Explore the Payoff​

Spot at Expiry$100k
$70k$130k
Call Premium Received$3k
$1k$10k
BE $97k$0+$8k-$27k$70kK $105k$130kSpot Price at ExpiryP&L
Settlement
$100k
P&L
+3.0k
Max Loss
-$27k
Max Gain
+$8k

When to Use​

  • You hold BTC (or ETH, or HYPE) and think it trades sideways or grinds slightly higher over the next few weeks
  • You're genuinely OK selling at the strike price. If you'd panic-buy it back at 97k, don't sell the 95k call
  • You want to lower your cost basis over time by harvesting premium every expiry cycle
  • IV is elevated. After a 15% weekly move, Deribit 14-day IV often spikes above 70%, and the premiums get fat
Common Mistakes
The mistakeSelling calls right before a catalyst (ETF decision, protocol upgrade, FOMC) because premiums are juicy.
The realityPremiums are juicy because the market is pricing in a move. You're selling cheap insurance on the day before the hurricane. If BTC gaps from $90k to $105k overnight, your short call goes deep ITM and you give away $15k of upside for $3k of premium.
The mistakePicking strikes too close to ATM to maximize income.
The realityA 10-delta call gives you 70-80% of the premium decay with 10% assignment probability. A 50-delta call gives you more premium but a coin flip of getting called away. Most pros target the 20-30 delta range.
The mistakeNot rolling when the short call is tested and you still want the position.
The realityWhen BTC trades through your strike with 5 days left, you can roll the call up and out (buy back the current, sell a higher strike further out) for a small credit or debit. Waiting until expiry to 'see what happens' is not a strategy.
💡

A covered call is a short put in disguise. Put-call parity doesn't care about your feelings.

Greeks at a Glance​

Greek
Sign
Plain English
Delta
+
Net long, but reduced. Holding spot (delta 1.0) minus the call delta. Typically 0.70-0.80 for a 25-delta short call.
Gamma
-
Your upside participation flattens as BTC approaches the strike. Negative gamma means the position gets shorter delta right when you want it to stay long.
Theta
+
Time decay earns you money every day. This is the whole point.
Vega
-
Rising IV hurts because it inflates the value of the call you sold. If you put this on when IV was 55% and it spikes to 75%, your mark-to-market suffers even if spot hasn't moved.

Theta works for you. Gamma works against you. That's the deal.

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