Anchorage Digital says disciplined covered-call writing can generate synthetic yield for Bitcoin holders, but only under carefully managed conditions. New research led by Head of Research David Lawant finds that selling upside via calls can cushion losses in weak markets while sharply capping gains during Bitcoin’s strongest rally phases.
Study Design and Market Context
The analysis evaluates systematic covered-call strategies on Bitcoin using hourly simulations across the Deribit implied-volatility surface. Anchorage Digital reports running more than 37,000 backtests across all possible entry points in a dataset spanning October 2021 to April 2026, making it one of the firm’s most detailed looks at when BTC options income helps—and when it hurts.
The firm argues Bitcoin options have evolved into an institutionally relevant market. Notional open interest has grown roughly ten-fold over five years, briefly topping $100 billion at the end of 2025 before settling near $60 billion during the study period—above the open interest of the entire BTC futures market, according to the paper. Options on the iShares Bitcoin Trust (IBIT), launched in late 2024, have also reshaped liquidity and now rival Deribit in open interest and trading activity. Anchorage Digital, whose subsidiary Anchorage Digital Bank N.A. is a federally chartered crypto bank, says today’s options market is deeper and structurally different than it was 18 months earlier.
Central to the research is Bitcoin’s volatility risk premium. Comparing 25-delta call implied volatility with subsequent realized upside volatility over the next 21 trading days for BTC, SPY, and QQQ, the paper finds BTC’s upside premium has averaged roughly two to three times equity benchmarks for most of the post-2024 period. That premium underpins the appeal of covered calls: collecting option income while retaining spot exposure up to a defined strike—at the cost of capping gains if spot rallies through that level.
Unfiltered Strategy Softens Drawdowns, Lags Over Full Cycle
A simple, unfiltered 20-delta, 30-day covered-call overlay performed well in the most recent 12 months tested. From April 30, 2025 to April 30, 2026, it generated a net yield of 5.5% on the underlying BTC position while spot Bitcoin fell 19.4%. In the simulation, the overlay offset nearly one-third of the drawdown, reduced annualized volatility from 40.6% to 35.0%, and improved maximum drawdown from 49.7% to 44.5%.
Across the full October 2021 to April 2026 period, however, the same approach delivered a negative yield of 0.5% (minus 0.1% annualized). That result came despite a 4.38-to-1 win/loss ratio (57 winning trades vs. 13 losing). Anchorage Digital describes the challenge as “picking up pennies in front of a steamroller,” with the “steamroller” being Bitcoin’s sustained, autocorrelated rallies. During the late-2021 peak, the 2023–2024 surge from roughly $16,000 to above $70,000, and the 2025 bull market that briefly pushed BTC past $100,000, short calls were frequently overrun as spot moved through strikes.
Filters Turn the Dial: Regime and Volatility Matter
The paper emphasizes that covered-call writing is an active management strategy. Anchorage Digital tested a rules-based filter requiring:
- No strongly bullish trend, based on a 10-day/30-day/50-day moving-average stack.
- Implied volatility above its 90-day rolling average at entry.
- Exits using a 75% take-profit threshold, a delta stop-loss, and a two-day buffer before expiry to reduce gamma risk.
With those filters, the covered-call contribution rose to 23.7% over the full period (5.2% annualized). The blended portfolio’s Sharpe ratio improved from 0.20 to 0.30, and the strategy was active only 44% of the time—illustrating the value of selectivity.
Parameters, Time Horizons, and Investor Takeaways
Parameter testing narrowed the productive corridor to 10–25 delta calls with expiries of at least 21 days. Deltas below 10 were consistent but often too small for many institutional mandates, while above 25 delta, directional exposure overwhelmed the strategy in bull markets. Seven- and 14-day maturities were structurally disadvantaged as Bitcoin’s intraday volatility triggered stop-losses before theta decay could accrue.
Rolling-window analysis underscored regime sensitivity. Over one-year windows, positive-yield rates across the 10–25 delta, 21+ day corridor ranged from roughly 55% to 85%. Over three-year windows, 11 of 12 configurations produced positive yield in at least 91% of periods, with five reaching 100%. Median annualized yields clustered between 4% and 6%.
The study’s bottom line: covered calls on Bitcoin are highly path-dependent. In slow or declining markets, they can generate meaningful income and reduce volatility. In powerful upside regimes, the same overlay can leave holders underexposed as rallies break through strikes. Anchorage Digital concludes that disciplined entry, regime awareness, and well-defined exit rules are essential to harvesting Bitcoin’s volatility risk premium without surrendering too much upside.