Trading Tutorial 3: Make Your Assets Work for You

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Generating returns from your BTC and ETH holdings.

Holders of BTC and ETH bear violent price swings but often completely miss out on the potential interest and returns that can be generated from holding the coin.

The yield that long-term coin holders can receive ranges from 4–50% per annum depending on risk appetite. We highlight some common ones below.

1. Lending

Loaning out your coin yields about 4–6% on BTC and 5–7% on ETH, depending on the level of collateralisation required. This is relatively low-risk and should be the minimum base interest expected on coin deposits.

2. Futures/Forwards Spreads

Market-neutral spreads against futures and forwards are yielding about 15.3% annualised for both BTC and ETH for the nearest contract on Bitmex. The higher yield comes with greater difficulty as these spreads usually need to be executed through algorithmic trading.

3. Options

Selling call options against your coin holdings can generate very high returns. This is a particularly appealing strategy for long-term holders because the absolute worst case-scenario is that you have to take profit on the coin at the strike level of your choosing. Otherwise, you will receive the premium on the option in full at expiry.

For example, if you sell an ETH call option with strike at 300 and expiry end-December, the yield generated on that is about 40% annualised. If ETH is above 300 level at expiry, you would be obligated to sell ETH at 300 (not too bad) and if it is below 300 by end-December you will realise the full return from the premium.

Higher strikes will typically generate lower returns. A 350 strike with the same details generates about 26% return.

Feel free to comment or contact us if you have any questions.

DISCLAIMER

The information in this post (the “Information”) is presented in summary form, and is solely for informational purposes, and does not purport to be complete. The information is not — nor is it intended to be — an offer to sell, or a solicitation of any offers to purchase any securities. The information does not constitute, and should not be treated as investment advice. The Information does not account for the specific investment objectives, financial situation(s), or any other particular needs of any prospective investor. No representation or warranty is hereby made, expressed or implied, with regards to the fairness, correctness, accuracy, reasonableness or completeness of the Information, nor does QCP Capital undertake to update the Information. Under no circumstances should the Information be regarded by any investor and/or individual as a substitute for their own judgement or research. All views expressed herein should not be relied upon as advice, and individuals and/or investors should seek their own legal, regulatory, tax, investment, accounting, financial, and any other relevant advice.

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