XRP traders have exhibited heightened activity in the options market this week, particularly focusing on call options with a $4 strike price. Amberdata data reveals a significant block trade involving one million contracts of these options on Deribit exchange. This trade, which saw a large user writing these options contracts, is noteworthy because it occurred despite XRP’s recent decline in price. 1,000 XRP was the size of each contract.
Experts suggest this market intensity could signify a covered call strategy rather than an expectation of a price increase. A covered call allows investors to restrict their profit expectations by selling call options on their existing XRP holdings while simultaneously generating income from the option premiums.
This strategy, popular with Bitcoin investors, has contributed to a decline in implied volatility over the past two years. The focus is on maximizing yields from existing assets rather than anticipating market surges. Market makers and investors are currently maintaining cautious trading strategies as liquidity remains high, ensuring the market maintains a neutral price setting.
The recent block trade of 1 million XRP call options at $4 level could be part of this strategy.
XRP’s price dropped to $2.94 on Monday, contributing to a broader downturn in the cryptocurrency market. However, it has since stabilized slightly above $3.
Market experts suggest that this block trade may be motivated by maximizing yield from existing XRP holdings rather than anticipating a price surge. A cautious approach is emphasized in current market dealings as liquidity remains high and market makers maintain neutral pricing strategies.