Covered Calls

What Is a Covered Call?

A covered call is an options strategy where an asset holder sells a call option on their asset while still owning it. This allows them to earn an upfront premium while potentially selling at a favorable price if the option is exercised.

How It Works

1️⃣ Hold an asset (e.g., 100 ETH) 2️⃣ Sell a call option at a higher strike price 3️⃣ Earn an upfront premium for selling the call 4️⃣ Two possible outcomes:

• If the asset price stays below the strike → Keep the premium and retain the asset.

• If the asset price rises above the strike → The asset is sold at the strike price, but the premium offsets some opportunity cost.

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Example: Covered Call on ETH

Scenario: Alice holds 100 ETH ($3,000 per ETH). She sells a 30-day call option with:

• Strike price: $3,300

• Premium received: $200 per ETH ($20,000 total)

🔹 If ETH stays below $3,300 → Alice keeps her ETH and the $20,000 premium. 🔹 If ETH rises above $3,300 → Alice sells ETH at $3,300 but still keeps the $20,000 premium.

Benefits of Covered Calls

✅ Earn passive income on idle holdings ✅ Hedge against small price drops ✅ Strategically sell at higher levels

Risks of Covered Calls

⚠️ Limited upside: If the asset price surges, you still sell at the strike price. ⚠️ Obligation to sell: If exercised, you must deliver the asset.

👉 Who Uses Covered Calls?

• HNWIs & Whales looking for passive yield.

• Treasuries generating stablecoin income.

• VCs & Asset Managers unlocking liquidity on locked tokens.

MYSO enables on-chain covered call execution with custom expiries & strikes.