Watch the video of this presentation on Gamma Prime’s YouTube channel:
Presentation by John Divine (Financial Markets Professional at BlockFills)
So, the first strategy I’ll explain is a covered call.
You own Ethereum, and you can sell call options against your Ethereum to generate cash flow — essentially, a rate of return. You can take that return in dollars or in Ether. Since you already own the asset, you’re selling someone else the right to buy your Ethereum at a higher strike price.
Here’s what I mean: for the March 28th expiration, we’ll use a $3,200 strike price while spot was trading at $2,655. That means the strike price is 21% above spot. We’re going to sell that option, which pays a 22% annualized rate of return. I’ll show it to you on the screen.
If you look on the left side of the chart, you’ll see the strike prices. I’ve highlighted $3,200 — that’s the strike price I want to sell. On Friday, when I made the slides, that option was bid at $48.
So, if I own one Ethereum, I can sell one $3,200 strike call option, which obligates me to sell my Ethereum at $3,200. In exchange for that obligation, I receive a yield — 22% annualized, or $48.
Let’s pause for a moment. Any questions on that one?
No? All right, we’ll continue.
Now, as we discussed, you own Ether and can sell upside call options to collect a premium yield. But in the next example, I’ll show how you can take that premium and use it to buy protection — the right to sell your Ether at a predefined strike price. This gives you a guaranteed sale price, effectively setting a floor for your Ethereum.
In this case, we’re selling the same $3,200 call option (March 28th) and using the premium to buy a $2,200 strike put — at zero cost.
So now, I have upside potential up to $3,200, but I also know I can sell my Ethereum at $2,200 no matter what happens. This trade setup was available this week — and again, it’s zero-cost.
If you look on the left, you’ll see the call market. I’m selling that $3,200 strike call option for $48 and using that amount to buy the $2,200 strike put, securing my floor price.
When Ethereum trades lower, that put option (your insurance or right to sell at $2,200) increases significantly in value, while the call option you sold depreciates.
In the current Ethereum market environment, this is the trade to have on.
