A comprehensive analysis from Anchorage Digital highlights the potential of Bitcoin covered-call strategies to generate synthetic yields for Bitcoin holders, although it warns that these approaches require disciplined management. According to their research, selling call options on Bitcoin can effectively cushion losses during market downturns, but it may also significantly limit profits during vigorous bull market rallies.
Led by David Lawant, the Head of Research at Anchorage Digital, the study delves into systematic covered-call writing on Bitcoin, employing hourly simulations across the Deribit implied-volatility surface. This extensive analysis encompasses over 37,000 backtests spanning various entry points from October 2021 through April 2026, positioning it as one of the most thorough examinations of Bitcoin options income dynamics.
Anchorage has observed that Bitcoin options have evolved from a niche segment to an integral component of institutional trading. Notional open interest in BTC options has surged almost ten-fold in the past five years, rising above $100 billion at the end of 2025 and stabilizing around $60 billion, a figure that outstrips the entire BTC futures market’s open interest. The emergence of IBIT options in late 2024 has also transformed market dynamics, quickly establishing itself as a competitor to Deribit in terms of open interest and trading activity, further indicating that the institutional landscape today is markedly more developed than it was just 18 months ago.
Central to the research is an examination of Bitcoin’s volatility risk premium. The analysis compares the implied volatility of 25-delta calls with subsequent realized volatility over the next 21 trading days for various assets, including Bitcoin and major equities like SPY and QQQ. Interestingly, Bitcoin’s upside volatility risk premium has averaged two to three times that of its equity counterparts in the period following 2024.
This premium is central to the appeal of covered calls, enabling Bitcoin holders to earn volatility income while maintaining a position in the underlying asset. However, the strategy comes with inherent trade-offs. If Bitcoin rallies past the predetermined strike price of the options sold, upside potential is capped. Anchorage emphasizes this dilemma as a core aspect of the strategy rather than a minor detail.
In a recent simulation, a simple 20-delta, 30-day covered-call strategy yielded a net 5.5% return on the underlying Bitcoin position from April 30, 2025, to April 30, 2026, even as Bitcoin’s market price fell by 19.4%. This overlay was able to offset nearly a third of the BTC drawdown, while also reducing overall portfolio volatility.
However, when taking a longer-term perspective across the entire analysis period, the same unfiltered strategy resulted in a slight negative yield of 0.5%, owing to Bitcoin’s periodic dramatic rallies that overwhelmed short call positions. Anchorage likened this situation to “picking up pennies in front of a steamroller,” referring to Bitcoin’s tendency for sustained, autocorrelated price increases.
Consequently, the analysis underscores that covered-call writing requires proactive management rather than a passive approach. An unfiltered strategy sold calls irrespective of market conditions, often at a loss during bullish phases.
By implementing filters—monitoring Bitcoin’s trend and requiring implied volatility to exceed its historical average—Anchorage found that the results improved significantly. This disciplined strategy increased the covered-call contribution to 23.7% over the entire period, demonstrating a marked elevation in Sharpe ratio, though it was only employed 44% of the time.
The research also provided insights into the effective range for call options, pinpointing that options with delta values between 10 and 25 and expirations of 21 days or longer were the most productive. Rolling-window analyses reinforced these findings, showing that effective yield rates within this corridor ranged from 55% to 85%, with stable positive yields over three-year windows.
In summary, the study concludes that Bitcoin covered-call strategies are not inherently flawed, but rather their effectiveness is highly dependent on market conditions. In sluggish or downtrending markets, these strategies can yield notable income, while in robust bull markets, holders may find themselves sidelined as their potential profits have been preemptively capped. As of the latest update, Bitcoin was recorded trading at $73,113.
