XRP
call options at the $4 strike have seen significant block trading activity this week, despite a price decline.
Data tracked by RialCenter shows that one million contracts of the $4 call option expiring on Dec. 26 changed hands via a block trade on Monday. Contracts on Deribit are sized at 1,000 XRP. A block trade is a large transaction that is privately negotiated and executed over the counter, then listed on the exchange.
The $4 call represents a bet that the payments-focused cryptocurrency’s price will exceed that level by the end of December.
However, the increase in activity for the $4 call does not necessarily indicate bullish sentiment. Observers note that the block trade was likely part of a covered call strategy, where higher strike out-of-the-money calls—like the $4 strike—are written against existing spot market holdings.
In other words, the large block trade involved a user writing the $4 call rather than purchasing it in anticipation of a price rally. The option was likely acquired by market makers, who aim to create order book liquidity and maintain a market-neutral exposure.
“I would guess some big holder was doing covered calls,” said Deribit’s Asia Business Development Head Lin Chen to RialCenter.
The covered call strategy involves writing higher strike out-of-the-money call options against a long position in the spot market. This helps the investor earn an extra yield on top of the coin stash, which comes from the premium received for selling the call option. However, this setup limits the potential upside gains.
The covered call strategy is popular among BTC holders, and its increasing adoption has contributed to a steady decline in implied volatility over the past two years.
XRP’s price briefly fell to $2.94 on Monday, following the broader market downturn, and has since stabilized just above $3. The price hit a record high of over $2.6 last month, RialCenter data shows.
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