In crypto trading, most strategies focus on price speculation—buy low, sell high. But what if there’s a way to generate steady income from your Bitcoin holdings, even in a sideways market?
Enter the covered call strategy.
This options strategy, borrowed from traditional markets, is gaining traction in crypto. It’s ideal for traders who hold Bitcoin and want to earn yield on it without selling—especially in a range-bound market.
What Is a Covered Call?
A covered call involves two parts:
- Owning the underlying asset (in this case, Bitcoin)
- Selling a call option on that asset
When you sell a call, you’re giving someone else the right to buy your Bitcoin at a set price (strike price) before a specific date (expiration). In return, you collect a premium upfront.
If Bitcoin stays below the strike price, you keep your BTC and the premium. If it rises above, you may have to sell it at the strike price—but you still keep the premium.
When to Use It
You believe Bitcoin will stay flat or rise modestly
- You already hold BTC and want to generate income from it
- You’re okay with potentially selling BTC at a pre-set price
Real Example: Selling a Covered Call on Bitcoin
Let’s walk through a simple example using real-world numbers.
Current BTC Price: $92,000
You Own: 1 BTC
Strategy: Sell a 1-week call option with a strike price of $95,000
Premium Received: $500
Scenario 1: BTC stays below $95,000 by expiry
- You keep the $500 premium
- You still hold your 1 BTC
- Net gain: $500 (0.8% in a week)
Scenario 2: BTC rises above $95,000
- You’re forced to sell your BTC at $95,000
- You still keep the $500 premium
- Your total proceeds: $95,500
- Profit from original price: $3,500 (BTC appreciation) + $500 (premium)
In both cases, you’re ahead. The risk? You cap your upside—if BTC skyrockets to $100,000, you still have to sell at $95,000.
They allow you to trade options on BTC, often with weekly expirations and flexible strike prices.
Final Thoughts
The covered call strategy isn’t about hitting home runs. It’s about base hits—generating consistent yield on an asset you already own. In a choppy or sideways market, this can be a smart way to make your Bitcoin work harder.
Just remember: if BTC surges unexpectedly, you may miss out on gains beyond the strike price. Use this strategy when you’re comfortable either holding or selling your BTC at a certain level.
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