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What are covered calls in cryptocurrency trading?

avatarKaushik PrabhathDec 25, 2021 · 3 years ago1 answers

Can you explain what covered calls are in the context of cryptocurrency trading? How do they work and what are their benefits?

What are covered calls in cryptocurrency trading?
Cryptocurrency
Covered Calls
Trading

1 answers

  • avatarDec 25, 2021 · 3 years ago
    Covered calls in cryptocurrency trading are a strategy where an investor sells call options on their existing cryptocurrency holdings. This strategy allows the investor to earn premiums from the call options while still holding onto their cryptocurrency. The investor is said to have a 'covered' position because they already own the underlying asset. If the price of the cryptocurrency remains below the strike price of the call option, the investor keeps the premium and the cryptocurrency. If the price rises above the strike price, the investor may be obligated to sell their cryptocurrency at the strike price. Covered calls can be a way for investors to generate income and potentially enhance their overall returns in cryptocurrency trading.

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