Massive 1M Block Trade of $4 XRP Calls Hits the Tape Amid Falling Prices

XRP

call options at the $4 strike have experienced heavy block trading activity this week, despite the price decline.

Data tracked by Amberdata 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 1,000 XRP. A block trade is a large transaction that is privately negotiated and executed over the counter and then listed on the exchange.

The $4 call represents a bet that the payments-focused cryptocurrency’s price will rise beyond that level by the end of December.

However, the surge in activity for the $4 call does not necessarily signal 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 (sold) 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, whose role is to create order book liquidity and maintain a market-neutral exposure.

“I would guess some big holder was doing covered calls,” Deribit’s Asia Business Development Head Lin Chen, told CoinDesk.

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. The setup, however, 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, tracking the broader market swoon and has since stabilized just above $3. Prices hit a record high of over $2.6 last month, CoinDesk data show.