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How can I use covered calls to hedge my investments in digital currencies?

avatarMeghanasrinivasDec 26, 2021 · 3 years ago1 answers

Can you provide a detailed explanation on how to use covered calls to hedge my investments in digital currencies? I'm interested in understanding the process and potential benefits.

How can I use covered calls to hedge my investments in digital currencies?

1 answers

  • avatarDec 26, 2021 · 3 years ago
    Absolutely! Covered calls can be a valuable tool for hedging your investments in digital currencies. By selling call options on the digital currencies you own, you can generate income and mitigate some of the downside risk. If the price of the digital currency remains below the strike price of the call option, you keep the premium and your digital currency. If the price exceeds the strike price, your digital currency may be called away, but you still keep the premium. It's important to carefully consider your investment goals and risk tolerance when selecting the strike price and expiration date for your call options. Overall, covered calls can provide a level of protection and potential income in the volatile digital currency market.