Rolling Covered Calls refers to an active options strategy where an existing covered call position is adjusted by repurchasing the previously sold call option and concurrently selling a new call option. This new option typically features a different strike price or a later expiration date.
Mechanism
The operational process involves closing the initial short call position, often to realize premium profit, avoid assignment, or adjust the risk profile. Immediately following this, a new call option is written against the same underlying cryptocurrency asset. This new option may be “rolled up” (higher strike), “rolled down” (lower strike), or “rolled out” (later expiration) depending on market outlook and desired premium income or risk management objectives.
Methodology
The strategic purpose of rolling covered calls in crypto options trading is to systematically generate consistent premium income from holding an underlying asset, extend the duration of income generation, or adapt to evolving market conditions. This technique aims to optimize the risk-reward profile of a portfolio by collecting additional premiums while managing the potential for the underlying asset to be called away at a specific price.
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