XRP Bullish Options' Popularity Jump May Be Due to ETF Speculation, Observers Say

• Traders have locked in over $2 million in XRP's $1.10 call option listed on Deribit, the highest across all available maturities.
• The large open interest in the nascent XRP options market likely reflects ETF optimism.

Deribit's nascent options market for XRP is experiencing a surge in activity, particularly in the $1.10 call option that represents a bet that prices for the payments-focused cryptocurrency will double by the end of the month.

As of writing, XRP's $1.10 call option, set to expire on Aug. 28, had an open interest of 4,347,000 contracts valued at $2.44 million, making it the most favored among all available XRP options on the exchange, according to data tracked by Amberdata. The amount is significant for an options market that is barely five months old.

The so-called open interest, or the number of active bets, has increased by 838,000 contracts in the five months alone.

According to Griffin Ardern, head of options trading and research at crypto financial platform BloFin, the increased activity in the $1.10 call likely reflects a net long positioning.

"From the gamma distribution, it feels like a net long position expiring on Aug. 30. If the resistance level of $0.75 from the past two weeks can be broken, the price of XRP is likely to rise above $1.10," Ardern told CoinDesk in an interview.

"Perhaps institutions will likely apply for an XRP ETF in the U.S., which may be an important factor driving a sharp rise in prices," Ardern added.

XRP rose over 30% to 62 cents last month but has since pulled back to just over 57 cents, according to CoinDesk data.

A call option gives the purchaser the right but not the obligation to buy the underlying asset, XRP, at a predetermined price on or before the expiry date. A call buyer is essentially bullish on the market, betting on a rally above the level at which the call has been bought. Gamma refers to the rate of change in an option's delta, reflecting how sensitive the option's price is to the changes in the underlying asset's price.

CoinDesk reached out to Deribit for further information.

Last Wednesday, U.S. District Court Judge Analisa Torres ruled on the Securities and Exchange Commission's (SEC) motion against Ripple Labs, stemming from a 2020 lawsuit over unregistered XRP sales. The court imposed a $125 million penalty for institutional sales of XRP and an injunction against further violations but rejected the SEC's demand for a $2 billion fine.

Ripple hailed the judgment as a victory, sparking hopes of a potential XRP ETF debut in the U.S. The regulator approved bitcoin and ether ETFs early this year, opening doors to billions of dollars in mainstream money.

Wen XRP ETF? pic.twitter.com/P4K1FJmKc9

— Nate Geraci (@NateGeraci) August 8, 2024

Still, Martin Cheung, Pulsar Trading Capital's options trader, expressed skepticism on whether prices could rally beyond $1.10 by Aug. 28.

"XRP has rallied a lot this year, plus, I think people are betting the next ETFs to be approved will be on XRP and SOL," Cheung said when asked about the increased demand for $1.10 XRP call options.

"That said, the August end is too close; a potential XRP ETF announcement might drive prices higher by, say, 20%, but $1.10 looks too far,' Cheung added.