XRP
Call options at the $ 4 strike have experienced a heavy trade activity this week despite the fall in prices.
Data Tracked of Amber Data shows that one million contracts with the $ 4 call option that expires on December 26 changed hands via a block trade on Monday. Contracts on abolition are dimensioned 1,000 XRP. A block trade is a large transaction that is privately negotiated and executed over disk and then listed on the stock exchange.
The $ 4 call represents an effort to make the payments-focused cryptocurrency’s price rise beyond this level at the end of December.
However, the increase in activity for the $ 4 call signalizes not necessarily bullish mood. Observers note that the block trade was likely to be part of a covered call strategy where higher strike out of money — as $ 4-strike (Sold) Against existing spot market holdings.
In other words, the big block trade involved a user who wrote the $ 4 call instead of buying it in anticipation of a price rally. The setting was probably acquired by market manufacturers whose role is to create order book liquidity and maintain a market -neutral exposure.
“I would guess that a big proprietor made covered calls,” Deribit’s Asia Business Development Head Lin Chen told Coindesk.
The covered call strategy involves writing higher strike out of money call options for a long position in the spot market. This helps the investor earn an extra yield on top of Coin Stash, which comes from the received premium for sale of the call option. However, the setup limits the potential upside gains.
The covered call strategy is popular with BTC holders, and its increasing adoption has contributed to a steady decline in implied volatility over the last two years.
XRP’s price dropped short to $ 2.94 Monday and tracks the wider market turn and has since stabilized just over $ 3. Prices hit a record height of over $ 2.6 last month, Coindesk data shows.
