Systematic Premium Harvesting describes an automated investment strategy focused on consistently generating income by selling options contracts and collecting the associated premiums. This approach often employs predefined rules for strike price selection, expiration dates, and overall risk management.
Mechanism
Algorithms continuously scan crypto options markets to identify opportunities for selling call or put options based on specific criteria such as implied volatility levels, time decay characteristics, and distance to strike price. Once an option is sold, the premium is immediately received, and the system monitors the position for potential assignment or expiration. Automated adjustments, like rolling options, are frequently integrated to adapt to market changes.
Methodology
The strategic objective of systematic premium harvesting is to capitalize on the empirical tendency for options premiums to exceed the actual realized volatility of the underlying asset over time. This methodology requires disciplined risk control, including appropriate position sizing and collateral management, to mitigate potential losses if the market moves unfavorably. It aims to generate steady income streams while managing defined risk parameters within the crypto options market.
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