Covered Call Strategy

Selling Options Without Maturity

In Limitless, LPs can generate yield via provided single-sided liquidity. Providing liquidity for a price range (p1,p2) is akin to underwriting options for a strike price between (p1, p2).

Limitless allows zero-slippage and perpetual covered-call or cash-secured-put strategies for any asset. There is no maturity, and LPs(options underwriters) do not have to roll over their positions.

Passive Strategy

For example, liquidity providers who want to provide single-sided liquidity for USDC in a ETH/USDC pair can do so by providing liquidity below the current price, such that the liquidity is entirely in USDC.

Those 'bids' would be lent out and accrue yield. It will still accrue yield even when the strike price(the ticks you have provided) has been crossed and the USDC has been converted to ETH(when your 'bid' turned to 'asks')

The position transitions from a cash secured put to a covered call and vice versa whenever the strike price is crossed.

Note that the position will convert between a cash-secured-put and a covered call position whenever the strike(provided ticks) is crossed. An example is shown on the diagram above: During time 0-T1, the position is a cash-secured put position, when the bids have been filled it becomes a covered-call position, and will finally transition back to a cash-secured put position at T2.

Here are some resulting strategies for an LP

1. An LP bullish on ETH can choose to provide liquidity below the current price with USDC. This would be a 'earning yield on your limit ETH buy orders' strategy.

2. An LP that believes ETH has limited upside can provide liquidity above the current price with ETH. This would be a 'earning yield on your limit ETH sell orders' strategy.

3. An LP that believes ETH will be within a range can choose a strategy that combines 1 and 2. This would be akin to a short strangle strategy.

An LP could also continuously lower his 'bids' or raise his 'asks' if he wants to keep his exposure limited to only USDC. He would try to capture the highest possible yields by placing the bids close to the current market price and adjusting the position by following the market.