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The Rat’s Nest of Weird Options: Constructing a Conservative Trading Strategy (1) Opening a Covered Position

1. What is a covered position opening?

Covered opening is a strategy in options trading that involves simultaneously holding an asset (such as a stock) and selling (or writing) a call option on that asset. This strategy is mainly used when the market outlook is judged to be slightly rising or volatile.

Example:
Suppose you hold a stock, say the price per share is 50 yuan. You don't expect the stock's price to rise significantly in the short term. At this time, you can perform a covered opening operation, that is, while holding the stock, sell (write) a call option with an exercise price of 55 yuan. By selling the option, you receive an immediate premium (the fee paid to you by the buyer).

The result of opening a covered position

If the stock price rises: but does not exceed $55 (the exercise price of the option), then the call option will not be exercised. Not only do you keep the stock, you also earn the option premium.
If the stock price rises significantly: above $55, then the buyer may exercise the call option. This means you need to sell the stock at $55 (even though the market price is higher). While you may have lost some potential stock appreciation, you still earned the option premium and proceeds from selling the stock.
If the stock price drops or stays the same: the call option will not be exercised, you still keep the stock, and receive the option premium.

2. When to use covered position opening strategy
When the stock price rises slightly or moves sideways
Choose an appropriate strike price: Choose a strike price that is slightly higher than the current stock price so that if the stock price rises slightly, the option will not be exercised and the option premium will be collected.
Option expiration time: Choose short- to medium-term expiration times so that you can reassess market conditions more frequently and adjust your strategy.
When market volatility is high
Leverage Volatility: In markets with high volatility, option premiums will typically be higher. In this case, you can earn more by selling the call option.
Pay close attention to market dynamics: High volatility may mean rapid changes in stock prices, and you need to pay close attention to market conditions in order to adjust your strategy in a timely manner.
When expecting extra income
Periodic strategy: Selling call options on a regular basis (such as monthly or quarterly) to earn a steady premium as additional income.
Choose a safe exercise price: Choose a relatively safe exercise price that is higher than the current stock price to reduce the possibility of the option being exercised.
When stock prices are high
Set a reasonable exercise price: When the stock price is high, you can choose an exercise price that is close to or slightly lower than the current stock price, so that you can sell the stock at a relatively high price when the stock price falls.
When preparing to exercise an option
Be prepared that the stock may need to be sold at the option price, especially if you believe the stock price has reached its highs.

3. Risk warning
Limits upside potential: If the stock price rises significantly above the strike price, investors will need to sell the stock at a strike price below the market price.
Stock downside risk: If the stock price falls, although the option premium can provide a certain buffer, it still cannot fully offset the loss of the stock price decline.
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4. How to construct your covered position opening strategy

How to deal with the market outlook for Auntie’s options? Provide me with my thoughts

First of all, make it clear that whether on-chain options or exchange options, I am only a seller. A crippled pure buyer's market, don't play.

Secondly, don't sell naked, be sure to follow a combination strategy, that is, a strategic stop loss.

It is recommended to use the Iron Eagle strategy, which is a universal strategy, especially in the currency circle that is experiencing sharp rises and falls.

Auntie's current price range can be set between 2,200 and 2,600.

To be more aggressive, set it at around 2,400.

Double selling at even value and double buying at low value is the Iron Eagle strategy.

Open ten orders with a margin of 1,000 U.S. dollars, and make a net profit of about 100 U.S. dollars every day, which is relatively high capital efficiency.

Discussions welcome.
#期权对冲

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1. Diversification: We know that putting all your eggs in one basket is very dangerous. By the same token, if you invest all in one or a few cryptocurrencies, your losses will be huge if those currencies fall. So, the key is to spread the risk.

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In this way, even if a certain currency performs poorly, the good performance of other currencies can make up for the loss.

2. Hedging with derivatives (options): Options are a powerful tool that can keep us calm when the market is unstable.

Options allow you to buy or sell a cryptocurrency at a specific price at a certain time in the future.

For example, if you are worried that the price of Bitcoin will fall, you can buy a put option. If the price of Bitcoin does drop, you can reduce your losses by selling Bitcoin at the price on the options contract.

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