Selling Covered Calls
Selling covered calls is a strategy in which an investor writes a call option contract while simultaneously owning an equivalent number of shares of the underlying asset.
When you sell a covered call, you get paid in exchange for giving up a portion of the future upside.
1. The investor has XX shares of a crypto-asset (AVAX, BTC, ETH) and the required collateral in USDC
2. The investor sells a call option contract that reflects those shares at the selected strike price and expiration date.
- The option seller (writer) may select any strike price or expiration date that correlates to their approach and view of the asset.
- The option writer also must decide on an option's expiration date.
Collateral is required to earn yield and is in the form of a token.
This yield represents the amount of USDC you would receive if the selected option expires out of the money.
If the option expires in the money, your yield and collateral will be at risk.