Short Call

Explore the Short Call strategy. This guide covers the basics of this popular options trading strategy, including its risks, rewards, and structure.

Directional exposure

Neutral to Bearish

Risk level


Volatility exposure:



Selling a call (going short) means agreeing to sell the crypto underlier at a given price (strike). Options are cash-settled, and we support multiple crypto-base currencies. For example, with USDC-settled options, the payoff is the difference between the USDC value of the underlier at expiration and the strike. Selling an uncovered call can result in large losses if the underlier moves in the opposite direction than expected (there are, however, strategies that option writers can use to limit risk taking, such as selling a covered call by owning the underlying crypto). Losses on DeVol when selling calls are capped to the option payoff associated with the highest value of the underlier in the expected range. Importantly, the DeVol Protocol โ€œblocksโ€ the amount of the sellerโ€™s trading funds so as to ensure that the maximum potential payment under the call is covered. This is what allows DeVol to operate with full collateralization.

DeVol Trading Tip: Sell a call to generate income if you expect the value of the underlier to end up at or below the strike at expiration.


BTC is currently trading at BTC/USDC 40,000. You sell one BTC ATM call option with a strike of BTC/USDC 40,000 and a one-week maturity. Implied volatility is 4% over the time to expiration (one week). Given six standard deviations in a lognormal scale, the expected range for BTC at expiration is BTC/USDC 31,385 to 50,980. Assume that the option is USDC-settled. Consider the following possibilities and associated payoffs when the option expires. Note that in all scenarios, you also have to factor in the cost of the option that you sold (i.e. the premium that you collected), to determine your final profit & loss. Also, as an option seller you post collateral in the amount of 10,850 USDC at the time you sell the option, which is the maximum payment amount you could end up owing as a result of selling this option under the collateralization of the DeVol pricing AMM. After settlement, these funds are released, adjusted for the option payoff owed.

In over 99% of the outcomes, there is only a small discrepancy between the DeVol settlement vs. what a traditional option would pay. As this example illustrates, this discrepancy can resolve itself in the traderโ€™s favor or against.

In the event of a very large, unusual increase in BTC price that falls outside of the expected range (far in the tail), this discrepancy becomes more significant. For example, if BTC doubles in a week and ends up trading at BTC/USDC 80,000, the payoff you would end up owing is capped to USDC 10,850. Why? This is because the DeVol protocol is fully collateralized, ultimately making for a safer exchange and trading experience. Settlement is based on BTC/USDC 50,980 as the maximum expected BTC price. As an option seller, your losses are therefore capped. If BTC ends up at BTC/USDC 1 million, the payoff you would owe would still only be USDC 10,850. Even though BTC is a volatile asset, we think an extreme event like this is as likely to happen as Dr. DeVol winning the lottery while climbing Mount Everest.

Definitions & Payout

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