The core idea
A covered call is one of the most popular income strategies in options trading. You own the underlying asset (say, 1 BTC), and you sell someone else the right to buy it from you at a specific price (the strike) before a specific date (the expiry).
In exchange for granting that right, you collect a premium upfront — cash in your account immediately, regardless of what happens next.
How the payoff works
There are two outcomes at expiry. If BTC stays below your strike, the option expires worthless — you keep your BTC and the full premium. If BTC rises above your strike, your BTC gets called away at the strike price, but you still keep the premium.
Your maximum profit is capped at the strike price plus the premium received. Your downside is the same as holding BTC outright, minus the premium cushion.
Why crypto covered calls pay so well
Crypto options carry much higher implied volatility than equity options — often 50–100%+ annualized. This means premiums are dramatically larger than what you'd collect on stocks. A 30-day BTC covered call 5% out-of-the-money can yield 1–3% of the underlying value, translating to 12–36% APR.
The trade-off: you cap your upside. If BTC rallies 20% in a month, you only participate up to your strike. For income-focused investors, this is an acceptable trade.
A simple example
You own 1 BTC at $67,000. You sell a $70,000 call expiring in 30 days for a premium of $1,350 (about 0.02 BTC). Three scenarios:
Scenario A — BTC stays at $67,000: Option expires worthless. You keep 1 BTC + $1,350 premium. Return: +2.0% in 30 days.
Scenario B — BTC drops to $60,000: You lose $7,000 on BTC but keep the $1,350 premium. The premium reduces your loss.
Scenario C — BTC rises to $75,000: Your BTC is called away at $70,000. You receive $70,000 + $1,350 = $71,350. You miss the extra $3,650 above strike.