I've been experimenting with several Ethereum options strategies lately, looking for ways to generate recurring premium income without necessarily holding the underlying asset. Today, May 21, 2025, I opened an interesting position: a synthetic covered call on ETH, combining a longer-dated synthetic long position with weekly call selling.

The idea is relatively straightforward. Instead of purchasing ETH outright, I use options to replicate long exposure and then sell shorter-dated calls against that position. If everything goes according to plan, the weekly premiums should gradually reduce my effective entry cost while keeping me exposed to Ethereum's potential upside.

What Is a Synthetic Covered Call?

A traditional covered call involves holding an asset, such as 1 ETH, and selling a call option against it. You collect the premium upfront, but in exchange, your upside becomes limited above the call strike price.

A synthetic covered call uses a slightly different structure. First, I create a synthetic long position by buying a call and selling a put with the same strike and expiration. Then I sell a shorter-dated call against that position.

The resulting strategy closely resembles owning ETH and selling covered calls, although the margin requirements, settlement mechanics, and risks can differ considerably from an ordinary spot position.

My Ethereum Options Trade: May 21, 2025

Here is the actual position I opened today. The synthetic long is structured around options expiring on July 25, 2025, giving me roughly two months to work with.

  • Buy 1 ETH ATM call: July 25, 2025 expiration — premium paid: 327 USDT.
  • Sell 1 ETH ATM put: Same strike and expiration — premium received: 253.10 USDT.
  • Net debit for the synthetic long: 73.90 USDT.

Together, these two options create exposure similar to holding 1 ETH. If Ethereum appreciates, the long call gains value. If ETH declines, the short put creates downside exposure. The 73.90 USDT is the initial option premium difference, not the total capital at risk.

With the synthetic position established, I added the income-generating component:

  • Sell 1 ETH call: May 23, 2025 expiration.
  • Strike price: $2,600.
  • Premium collected: 31.20 USDT.

This immediately reduces my net option premium outflow from 73.90 USDT to 42.70 USDT, before fees. Of course, that doesn't mean I've made a profit yet. The position remains open, and the final result will depend on what ETH does next.

Why I'm Selling Weekly Calls

The longer-dated synthetic position expires on July 25, while the first short call expires this Friday, May 23. My plan is to continue selling weekly calls against the synthetic exposure, collecting additional premiums as long as market conditions allow.

Ideally, I'd like to generate around 300–400 USDT in cumulative short-call premiums before the July expiration. That's an ambitious target rather than a guaranteed return, but it gives me something measurable to work toward.

If ETH stays below $2,600 this Friday, the short call should expire worthless, allowing me to consider opening another call for the following week. If Ethereum rallies above the strike, I'll evaluate rolling the call up and forward, or otherwise adjusting the position.

I've used similar adjustments in my stock options portfolio. Sometimes rolling works beautifully, while other times the market forces you to extend the trade much longer than originally intended. That's simply part of selling options.

Break-Even and Potential Returns

One attraction of this strategy is the possibility of reducing my effective ETH exposure cost through repeated premium collection.

The initial synthetic position required a net premium payment of 73.90 USDT. With another 31.20 USDT received from the first weekly call, the net premium outflow is currently 42.70 USDT.

If I manage to collect another 300–400 USDT in gross premiums over the coming weeks, the accumulated income could provide a meaningful cushion against an ETH decline.

My working target is an effective break-even somewhere around $2,100–$2,200 by July expiration. This is a planning estimate, dependent on the synthetic position's strike, premiums actually retained, fees, and any adjustments. It is not a guaranteed break-even level.

There are several possible scenarios. If Ethereum rallies, the synthetic long should benefit, although the weekly short calls can limit my gains. If ETH trades sideways, I may be able to collect multiple rounds of premium. If Ethereum falls sharply, however, the synthetic long can lose substantial value, and the accumulated premiums may cover only a small portion of those losses.

What Happens If ETH Drops?

I'm approaching this trade with the understanding that I may ultimately want to retain long exposure to Ethereum.

If ETH finishes below the synthetic position's strike at the July 25 expiration, the short put will have an intrinsic loss. Economically, this resembles having purchased ETH at the strike, although the actual settlement depends on the exchange's contract specifications.

One possibility I'm considering is maintaining long exposure through a perpetual futures position and continuing to sell calls, provided the margin requirements and market conditions remain reasonable. That would introduce additional funding and liquidation risks, so it isn't an automatic decision.

The key is to have a plan before the market moves against me. Weekly premiums are attractive, but they don't eliminate the downside of being synthetically long Ethereum.

Final Thoughts

I find the synthetic covered call an interesting alternative to purchasing Ethereum outright, especially when combining a longer-dated bullish position with shorter-dated premium collection.

For now, the first milestone is this Friday's expiration. I've collected 31.20 USDT from the initial short call, and I'll be watching whether ETH stays below $2,600 or whether an adjustment becomes necessary.

Ultimately, I'm more interested in building repeatable options strategies than predicting where Ethereum will trade next week. The premiums are useful, but position sizing, collateral management, and the ability to handle adverse market moves matter much more.

Editor's note (November 2026): We've continued developing our Ethereum options strategies, including cash-secured puts, covered calls, and shorter-dated premium-selling approaches. This trading experience now forms part of the strategy behind TerraM Token, our Solana-based token traded on the Raydium DEX. Realized trading profits may be allocated to discretionary TerraM buybacks and liquidity development, connecting our options activity with the on-chain token ecosystem.