What to know:
- One million contracts of the $4 XRP call option expiring on Dec. 26 changed hands via a block trade on Monday.
- The massive trade was likely a part of an investor’s covered call strategy.
In this article
XRPXRP$2.9700◢5.05%XRP
call options at the $4 strike have experienced heavy block trading activity this week, despite the price decline.
On Monday, a significant number of one million contracts for the $4 call option expiring on December 26, each representing 1,000 units of XRP, were traded off-exchange in a large, private transaction known as a block trade, and subsequently recorded on Deribit exchange.
The $4 call option implies that the investor believes the value of the payments-centric crypto will surpass this point before the end of December.
Yet, an increase in activity for the $4 call doesn’t automatically mean a positive outlook. In fact, it might be related to a covered call strategy, where higher strike prices, such as the $4 strike, are sold (written) alongside existing stock holdings.
Essentially, this means that instead of buying the $4 call outright, the user wrote it – a strategy that implies they expect the price not to rise. Likely, these calls were taken up by market makers who are responsible for ensuring there’s enough buying and selling activity in the market (liquidity) and keeping their overall market position balanced (market-neutral exposure).
Lin Chen, Deribit’s Asia Business Development Head, speculated that perhaps someone with a substantial position might have been engaging in a covered call strategy.
A covered call strategy is a method where an investor sells higher-priced call options for stocks they already own in their portfolio (long position in the spot market). This action generates additional income through the premium paid for the sold call options, which is often referred to as ‘bonus earnings’. However, it’s important to note that this strategy also restricts the potential profit one could make from the upside growth of the underlying asset.
In simpler terms, more Bitcoin owners are adopting the covered call strategy, which has led to a gradual decrease in expected volatility during the last two years.
On Monday, XRP’s temporary dip reached $2.94, mirroring the wider market downturn, but it has now leveled out slightly above $3. According to CoinDesk, prices peaked at over $2.6 recently, reaching a new record high in the past month.
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2025-08-19 15:19