How does a covered call work in the context of cryptocurrency trading?

1 answers

• Apr 24, 2022 · 3 years ago
  In the context of cryptocurrency trading, a covered call works by selling a call option on a cryptocurrency that an investor already owns. This strategy allows the investor to generate income from the premium received for selling the option. If the price of the cryptocurrency remains below the strike price of the call option, the investor keeps the premium and the cryptocurrency. However, if the price exceeds the strike price, the investor may be obligated to sell the cryptocurrency at the strike price. This strategy can be beneficial for investors who want to generate income from their cryptocurrency holdings, but it also carries risks. If the price of the cryptocurrency rises significantly, the investor may miss out on potential gains. Additionally, if the market is highly volatile, the premium received may not be sufficient to offset potential losses. It's important for investors to carefully consider the risks and rewards before implementing a covered call strategy in cryptocurrency trading.
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