Option Classroom (2) Let me translate this trading method for options Assuming @ CryptoRounder bought 1 Bitcoin: native spot for $59000. Now BTC has rebounded to $63000, and he has already made a profit on his books: 63000-59000=$4000 If he doesn't do anything at this point, it's just a pure spot long position. For every $1000 increase in BTC, he probably earns $1000 more, and for every $1000 decrease in BTC, he probably earns $1000 less. Then he started selling calls. For example, when he sells a BTC call with a strike price of $64000 and a 2-day maturity, the Delta at this position in the screenshot is approximately 0.26, and the annualized selling rate is approximately 81%. This 81% annualized conversion to actual royalty is approximately: 64000 x 81% x 2/365 ≈ $284 So he sold this call for a royalty fee of approximately $280. At this point, his position becomes: 1 BTC spot=+1 Delta Sell 1 64K call=-0.26 Delta Net Delta=+0.74 To put it simply, if BTC rises by another $1000, he theoretically earns around $740, not the original $1000 for pure spot trading. The rising earnings were partially deducted, but he received a $280 option premium. Of course, Delta buddies don't need to worry about it, they just received a portion of the royalty in advance. The price below is the most cost-effective, and the price above will earn less. continue There will be several outcomes upon expiration. If BTC expires at $62000, this $64000 call becomes invalid and there is no need for delivery. The $280 royalty will be taken in full. His total income (book income+actual income) is: Spot income: 62000-59000=$3000 (book income) Option return:+280 USD (actual return) Total revenue: $3280 If BTC matures at $64000 (which is actually not possible, just an example), and there is basically no additional loss on call, he still takes $280. His total income is: Spot income: 64000-59000=$5000 (book income) Option return:+280 USD (actual return) Total revenue: $5280 If BTC matures and rises to $66000, then the 64K call he sold has been breached. If settled in cash at this time: Spot yield: 66000-59000=$7000 (actual yield) Selling call loss: 66000-64000=-2000 USD (actual loss) Royalty income:+280 USD (actual income) Total revenue: 7000-2000+280=5280 USD So it can be understood that if it exceeds the selling price ($64000), regardless of the final price of BTC, its returns are almost locked in a fixed range ($5280). This is the meaning of 'deliver upon penetration'. And there is another type of cumulative negative Delta that may seem complicated, but it's actually not difficult. Assuming there is still 1 BTC spot in hand, the cost is $59000. Now BTC has rebounded to $63000 and started selling calls. The first call sold is for an exercise price of $64000, assuming a premium of $280 is received. The meaning of this call is to be willing to sell BTC at $64280 if it rises above $64000 upon maturity. Because there is 1 BTC spot in hand, this call is covered by spot. Then I sold a second call with an exercise price of $65000, assuming I received another $105 premium. At this point, the two calls received a total of $385 in royalties. The problem lies in the second call. Because there is only one BTC spot, the first $64000 call has already locked in the rising returns of this BTC above $64000. Selling a second $65000 call is equivalent to selling an additional call without stock coverage. If BTC matures at $64000 and the spot price rises from $59000 to $64000, the spot will earn $5000. Both calls did not incur any losses, and with the $385 royalty received, the total profit was $5385. If BTC matures at $65000 and the spot price rises from $59000 to $65000, the spot price will earn $6000. But the $64000 call was breached, resulting in a loss of $1000. The $65000 call has just reached the exercise price without any additional losses. Finally, 6000-1000+385=$5385. That is to say, during the period when BTC rose from $64000 to $65000, the total profit did not increase because the $1000 increase was offset by the first call. If BTC matures at $66000 and the spot price rises from $59000 to $66000, the spot price will earn $7000. But a $64000 call would result in a loss of $2000, and a $65000 call would also start to lose $1000. Finally, 7000-2000-1000+385=$4385. BTC rose from $65000 to $66000, and spot trading only earned an extra $1000. However, thanks to the two calls totaling $2000, the total profit actually decreased by $1000. This is the meaning of accumulating negative Delta. Of course, if all three locations have spot Bitcoin, that's another matter. Assuming 3 BTC were purchased at $59000, the total cost would be: 59000 × 3=177000 USD Now BTC has risen to $63000 and is starting to sell calls in batches. Sell three calls: The first call is for an exercise price of $64000, assuming a premium of $280 is received. The second call is for an exercise price of $65000, assuming a premium of $105 is received. The third call is for an exercise price of $66000, assuming a $40 premium is received. Three calls received in total: 280+105+40=$425 The meaning of this structure is to divide three BTC into three tiers for sale: The first one is willing to sell for 64000+280=64280 US dollars. The second one is willing to sell for 65000+105=65105 US dollars. The third one is willing to sell for $66000+40=$66040. If the BTC expires below $64000, such as $63500, all three calls will be invalidated. Still holding 3 BTC and receiving $425 in royalty for free. At this point, the profit is: 4500 × 3=13500 USD Adding the royalty fee of $425, the total profit is: 13500+425=13925 USD If the expired BTC rises to $65000, the three BTC spot coins would have earned a total of: 65000-59000=6000 USD 6000 x 3=18000 USD But the $64000 call sold was pierced, resulting in a loss: 65000-64000=$1000 The other two $65000 and $66000 calls have not incurred any losses yet. So the total profit is: 18000-1000+425=17425 USD This is equivalent to the first BTC being sold around $64280, while the other two BTC continue to rise. If the expired BTC rises to $66000, the three BTC spot coins would have earned a total of: 66000-59000=$7000 7000 × 3=21000 US dollars But a $64000 call would result in a loss: 66000-64000=$2000 $65000 call to lose: 66000-65000=$1000 The $66000 call has just reached the exercise price without any additional losses. So the total profit is: 21000-2000-1000+425=$18425 This is equivalent to the first two BTC being sold around $64280 and $65105 respectively, and the third BTC still waiting for delivery around $66040. If the expired BTC rises to $70000, the three BTC spot coins would have earned a total of: 70000-59000=$11000 11000 × 3=33000 USD But all three calls were pierced: 64000 USD call loss of 6000 USD $65000 call loss of $5000 $66000 call loss of $4000 Three calls resulted in a total loss: 6000+5000+4000=15000 USD The final total profit is: 33000-15000+425=$18425 So once BTC rises above $66000, the returns are basically capped. This is the core of this strategy. I bought 3 BTC at $59000 and then sold calls for $64000, $65000, and $66000 respectively after rebounding to $63000. This is equivalent to placing three sell positions in advance, but without directly placing a spot sell order, instead collecting a premium through a sell call. If BTC doesn't rise, continue holding BTC and earn more royalties. If BTC rises, he will gradually sell BTC at three levels of $64000, $65000, and $66000. If BTC skyrockets to $70000, he won't be able to afford an increase of over $66000, as the gains from the rise of three BTC coins are offset by three calls.