Selling Covered Calls on Bitcoin: TBL Weekly #168How some investors generate income on their own bitcoin, explained
Dear readers, This weekly letter builds on Options 101 and Theta Capital by examining a strategy used by investors who already own bitcoin and want to generate income from their holdings. Selling covered calls is often described as a way to “earn yield” while holding bitcoin. In practice, the strategy involves selling short-dated upside optionality in exchange for premium. It tends to work best when markets move sideways or grind higher slowly, but can underperform during sharp upside moves. This letter focuses on how covered calls actually work in practice, why some investors knowingly make that trade, and where the strategy can underperform. As always, this letter is for educational purposes only, it is not financial advice nor a recommendation to execute any strategy. That being said, let’s get into it.
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Use code TBL to take 15% off your purchase. What a Covered Call Really IsIn Options 101, Johan explained options as a way to buy or sell optionality, meaning the right to benefit from future price moves. A covered call is simply what that looks like when you already own an asset (in this case, bitcoin) and choose to sell some of that optionality to someone else. In practical and bitcoin terms, selling a covered call means you agree to sell your bitcoin at a specific price called the “strike price” (chosen by you) if the market reaches that level before the option expires. Someone pays you today (called a premium) for that possibility, and you keep that premium whether or not the sale ever happens. Framed this way, a covered call is a choice about how you want to get paid while you hold bitcoin, either entirely through future price appreciation, or partly through cash today in exchange for possibly giving up gains beyond a chosen level. It is not a prediction about where bitcoin will go next. This is why covered calls are better understood as selling volatility rather than trading direction. You are getting paid because the market is willing to pay for the possibility of large price moves, not because you are trying to time the next one. Selling puts and selling calls can both generate income, but they serve different purposes. Selling puts is a way to get paid while waiting to buy bitcoin at lower prices. Selling covered calls is a way to get paid while holding bitcoin you already own. Why Bitcoin Is Uniquely Suited for Covered CallsCovered calls can be sold on many assets, but bitcoin stands out because of how upside is priced and who is willing to pay for it. One reason is that bitcoin options consistently assume bigger moves than what USUALLY occur over short periods. Option prices reflect the expectation of large swings, even during weeks when price action is relatively calm. That gap between what is expected and what typically happens is where call sellers get paid. The following chart is a histogram showing the distribution of bitcoin’s weekly percentage returns... Subscribe to The Bitcoin Layer to unlock the rest.Become a paying subscriber of The Bitcoin Layer to get access to this post and other subscriber-only content. A subscription gets you:
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Friday, January 23, 2026
Selling Covered Calls on Bitcoin: TBL Weekly #168
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