A Covered Call to Benefit From a Flat Market

Options Strategies
1

A covered call is created by owning an asset and selling an equivalent amount of call options. To execute this strategy, a trader holds a long position in an asset and writes (sells) call options on that same asset to generate an income stream.

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Lucy is holding ETH with a price of $750. She expects that the market will stay flat for a while and wants to possibly lower her cost in the flat market. Therefore, she decides to sell ETH calls with the strike price of $760 and earn the premiums of $50 immediately.

If the price gets higher than $760, she will sell when the option buyers exercise the calls. If the price stays lower than $760 till expiration, she will still get premiums and lower the cost of holding one ETH by $50.

In this example, Lucy employs a covered call strategy as she intends to hold the underlying asset for a long time but does not expect an appreciation in price in the short term, and she is satisfied with selling the assets at a predetermined price.

Please note that FPO v1.0 on FinNexus doesn’t allow for selling options for now.

2

Thanks @Ryan!

I would personally use this myself to generate additional income for my ETH when the markets are flat.

Any ideas if/when support for selling covered calls would be added?

3

It needs more careful re-modelling to the current protocol.
As the DeFi Options liquidity solution is much different from the orderbooks in traditional finance, most of them are at an experimental stage. We need to be more cautious.