Zcash Volatility Yields Higher Options Premiums Than Bitcoin

Zcash has experienced an impressive surge in value over the past month, rising by more than 142% to reach $1,236. According to Grayscale Head of Research Zach Pandl, Zcash's smaller market capitalization and higher price volatility compared to Bitcoin make options a useful tool for investors seeking risk management or alternative income.

Pandl notes that Bitcoin has become less volatile as it matures, with its realized annualized volatility averaging around 40% over the past year. In contrast, Zcash's price volatility has averaged about 140% over the same period, making options particularly useful for managing risk and pursuing alternative sources of income.

A hypothetical covered call strategy on Zcash could generate premium income equivalent to an implied yield of 70%, compared to an annualized yield of around 30% available through Bitcoin covered call strategies. However, this also comes with greater risk, as investors may suffer capital losses when the underlying spot price falls by more than the premium received.

Pandl suggests that investors looking for more clearly defined outcomes can consider long call or put option structures. The higher potential income from Zcash options is a result of its much higher volatility compared to Bitcoin, which has reduced the potential premium available through covered calls.