Here’s how to properly earn a DeFi sized yield trading Bitcoin options

摘要： Here’s how investors can use Bitcoin options to generate DeFi-sized yields without having to wrap their hodl stack.

▲圖片標題(來源：cointelegraph.com)

I recently caught wind of an interesting Cointelegraph article explaining how investors could earn 41% APY on their Bitcoin without converting it to renBTC or WBTC.

In the article, the writer laid out a detailed case for generating yield on Bitcoin (BTC) holdings by investing in options markets instead of decentralized finance (DeFi) apps.

While we are proponents of this exact strategy some of the explanations laid out in the article are more confusing than useful so I want to add a little clarity to the best way to execute this strategy.

How Do Covered Calls Work?

In the article, the author describes a covered call strategy as consisting of “simultaneously holding BTC and selling the equivalent size in call options.”

When selling the calls against your long BTC you receive the call premium, which is the price the buyer pays for the option to buy BTC at the strike price specified in the call option contract. The returns on a covered call strategy, then, depend on the premium you can generate.

Options premiums are difficult things to understand and it’s worth mentioning that Myron Scholes and Robert Merton won a Nobel Prize in 1997 for figuring out a reliable way to price them. But generally, the premium increases when the contract length is longer, when the difference between the price today and the strike price is smaller, and when BTC’s volatility is higher.

詳見全文FULL TEXT： cointelegraph.com

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