This week has witnessed notable activity in XRP call options, centered around a $4 threshold. As reported by Amberdata, one million contracts with a $4 strike price saw movement on Monday, set to expire on December 26. These contracts, each comprising 1,000 XRP, were reportedly issued by a major player on the Deribit platform.
What Drives the Options Market’s Volatility?
Despite XRP’s recent depreciation, this large transaction signals unique dynamics in the options market. Such block trades are distinct for their large scale and specially negotiated terms, with these agreements subsequently registered on exchanges. The $4 call option is a bet on XRP exceeding this price point by the expiration date.
However, this heightened activity may not indicate a bullish outlook. Analysts suggest that these transactions represent a covered call strategy, which involves hedging current XRP positions. This tactic limits potential price gains by pairing investments with options.
Is the Covered Call Strategy Comprehensive?
A covered call involves writing a call option above the current market price, using owned XRP to back the option. Here, investors aim to derive income from option premiums, though they risk capping profit should prices rise.
Market professionals suggest that this significant block trade forms part of a covered call approach. Lin Chen, Deribit’s Asia Head of Business Development, stated:
“I surmise a major investor is executing a covered call strategy.”
This method is notably favored by BTC investors, who have seen implied volatility decrease steadily over two years, primarily focusing on generating additional income from their assets.
How Is XRP Currently Priced?
Recently, XRP’s price dipped to $2.94 before moderating slightly above $3 amid a wider cryptocurrency market downturn. Last month, XRP witnessed a record rise to over $2.6, reflecting volatile swings common in this sector.
- XRP call options saw major activity set at $4.
- The transaction entails a potential covered call strategy.
- XRP’s recent decline hit $2.94 before stabilizing above $3.
- The focus remains on deriving extra income with existing holdings.
Thus, the block transaction seems aimed more at capitalizing on current assets rather than speculating on market growth. Such prudent strategies maintain market liquidity while ensuring neutral price dynamics continue to benefit from strategic transactions like these.
