Crypto Options: Covered Calls and Protective Puts, Explained

The two options strategies a newcomer can actually use (not a full Greeks course), walked through on Deribit and OKX.

What it is

A call option gives you the right (not the obligation) to buy an asset at a set price (the strike) before a set date (expiry). A put option gives you the right to sell at the strike before expiry. You pay a premium to hold either right, and that premium is the most you can lose as a buyer, which is the opposite risk shape from futures, where losses can exceed your initial margin.

Most crypto options volume happens on two platforms: Deribit, which has historically carried the deepest BTC and ETH options liquidity, and OKX, which offers options alongside its broader derivatives suite. If you’re trading on a specific exchange, see Trading Options on Bybit or Trading Options on OKX for the platform-specific walkthrough.

Why most beginners should skip “buying options” and start here instead

Buying a call or put outright is a directional bet with a built-in time limit: the premium decays as expiry approaches, so you can be right about direction and still lose money if it takes too long to play out. The two strategies below don’t have that problem in the same way, because they’re built around assets you already hold.

Covered call

If you already hold BTC or ETH and don’t expect a big near-term move, you can sell a call option against your holding and collect the premium as income. If the price stays below the strike, you keep the premium and your coins. If it rises above the strike, you’re obligated to sell at the strike price, capping your upside, but you still profit up to that point plus the premium.

Worked example: you hold 1 BTC, currently trading at $60,000, and sell a 30-day call at a $65,000 strike for a premium of 0.015 BTC (about $900 at that price). If BTC is anywhere below $65,000 at expiry, the option expires worthless: you keep the 1 BTC and the $900, an effective 1.5% yield for the month regardless of whether price went up, down, or sideways underneath the strike. If BTC instead rallies to $70,000, you’re obligated to sell your 1 BTC at $65,000. You still keep the $900 premium, so your effective exit price is $65,900, but you miss out on the additional $4,100 you’d have made simply holding. The premium isn’t a bonus on top of unlimited upside; it’s compensation for giving that upside away past the strike.

Protective put

If you hold BTC or ETH and want downside insurance without selling, you can buy a put option below the current price. If the price falls, the put gains value and offsets your loss. If it doesn’t, you lose only the premium, the same way insurance works: you’re paying for protection you hope not to need.

Worked example: BTC is trading at $60,000 and you buy a 30-day put at a $55,000 strike for a premium of 0.02 BTC (about $1,200). If BTC drops to $48,000 by expiry, the put lets you sell at $55,000 instead of the $48,000 market price, a $7,000-per-BTC difference that comfortably covers the $1,200 premium, leaving you roughly $5,800 better off than if you’d held unprotected. If BTC instead stays flat or rises, the put expires worthless and the $1,200 is gone, the same way a year without a house fire doesn’t refund your homeowner’s insurance premium. The put isn’t a bet that price will fall; it’s a cost you accept for capping how much a fall can hurt.

Walkthrough: selling a covered call on Deribit

Confirm you hold the underlying asset in the amount the contract requires. A covered call assumes you already own what you’d be obligated to sell. Deribit and OKX size contracts differently, so check the contract multiplier before assuming “1 contract” means “1 coin.”
Open the options chain for the asset and expiry date you want, and find a strike above the current price that reflects how much upside you’re comfortable capping. A strike close to the current price pays a larger premium but caps your upside sooner; a strike further out pays less but leaves more room to profit before you’re capped.
Sell to open the call at that strike, and confirm the premium you’ll receive. Check the bid-ask spread before submitting. Options on less-liquid strikes or longer-dated expiries can have wide spreads, meaning the price you actually receive may be noticeably worse than the chain’s midpoint quote.
Track it to expiry. If price stays below the strike, the option expires worthless and you keep both the premium and your coins. If it settles above the strike, your coins are called away at the strike price. Check whether your contract settles in cash or physically delivers the underlying. This changes what actually happens in your account on expiry day.

Common questions

Can I lose more than the premium buying a protective put? No: as the buyer of an option, the premium you paid is the maximum you can lose, full stop. That asymmetry is the entire appeal of buying options over trading futures, where losses aren’t capped at what you put in.

What happens to my coins while a covered call is open? They’re typically locked or reserved as collateral for the obligation rather than physically moved off your account, but the exact mechanism varies by platform. Confirm whether Deribit or OKX let you use those coins for anything else (like additional collateral) while the call is open before assuming they’re fully available.

Why would I choose a covered call instead of just holding? Only if your outlook is neutral to mildly bullish and you specifically want extra yield on a position you’re not expecting to run hard. If you think a big rally is likely, selling a call against it is giving away exactly the upside you’re expecting; hold uncovered instead.

Risk

Selling a covered call caps your upside: if the asset rallies hard past the strike, you miss those gains in exchange for the premium you already collected, and there’s no way to “undo” that once the option is sold without buying it back, often at a worse price than you sold it for. Buying a protective put costs a premium whether or not you end up needing the protection, and repeatedly buying puts you don’t end up needing is a real, cumulative cost over a year of monthly hedges, not a one-time expense. Options pricing and expiry mechanics are more complex than spot or even futures; don’t trade a strategy you can’t explain back in your own words. Nothing on this page is financial advice.

The futures/options PnL calculator (in production) will model premium, strike, and breakeven for both strategies above before you place them.