FXRP from Flare can be used as collateral on Derive, allowing XRP holders to sell options directly against their position.
One of the simplest ways to use this is a covered call: hold FXRP as collateral, sell an XRP call option, and collect premium in return for giving up some upside above a chosen price.
This guide walks through how it works.
What is a covered call?
A covered call combines:
- A long position in the underlying asset (in this case FXRP)
- A short XRP call option
When you sell the call, you receive an option premium upfront.
In exchange, if XRP rises above the option's strike price, the short call begins losing value and offsets some of the gains on your FXRP.
Another way to think about it: you are getting paid to pre-commit to selling your upside above a certain price.
Example
Suppose:
- XRP is trading around $1.00
- You hold 10,000 FXRP
- You sell a $1.10 XRP call
- You receive approximately $82 in premium
That premium is yours regardless of where XRP ultimately settles.
The outcome depends on the XRP price at expiry.
XRP finishes below $1.10
The call expires out of the money.
You keep your FXRP exposure and the premium you received from selling the option.
In this scenario, the covered call earns more than simply holding FXRP.
XRP finishes above $1.10
Your FXRP increases in value, but the short call begins generating a loss once XRP moves above the $1.10 strike.
The result is that your upside above the strike is effectively capped.
You still keep the premium, but you would have made more by simply holding FXRP if XRP rallied significantly.
How to sell an XRP covered call on Derive
1. Deposit FXRP
Deposit FXRP into your Derive account and use it as collateral.
This allows you to maintain XRP exposure while using the position to collateralize your options trade.
2. Open the XRP options market
Navigate to the XRP options chain and choose the expiration you want to trade.
Shorter expiries allow you to reset the strategy more frequently, while longer expiries generally mean committing your upside for longer.
3. Choose your strike
Select a call strike above the current XRP price.
The strike determines the price above which you begin giving up additional upside.
Generally:
- A higher strike preserves more potential upside but tends to pay less premium
- A lower strike tends to pay more premium but caps your upside sooner
4. Sell the call
Select Sell to Open, enter the amount of XRP calls you want to sell, and review the premium and position before submitting the order.
For a covered position, the amount of calls sold should correspond to the XRP exposure you intend to cover.
5. Monitor the position
Once filled, the premium is credited to your account.
You can monitor the position, PnL, Greeks and margin directly through Derive and either hold the option through expiry or close the trade beforehand.
When do covered calls make sense?
Covered calls are generally used by holders who are neutral to moderately bullish.
They can make sense if you:
- Already intend to hold XRP
- Want to generate income from the position
- Have a price above which you would be comfortable giving up additional upside
- Don't expect XRP to make a large move higher before expiry
The strategy is less attractive if you expect a sharp rally, because the short call limits how much of that move you capture.
What are the risks?
Selling a covered call does not remove the risk of owning XRP.
If XRP falls significantly, your FXRP position also falls in value. The option premium provides some additional income, but only a limited buffer against those losses.
The main tradeoff is on the upside.
If XRP rallies substantially above your strike, the gains on your FXRP are increasingly offset by losses on the call you sold.
Below the strike: you generally outperform simply holding FXRP by the amount of premium earned.
Far above the strike: you generally underperform simply holding FXRP because you have sold away part of the upside.
Bringing XRP into onchain options
FXRP gives XRP holders a way to bring their XRP exposure onchain through Flare.
Using FXRP as collateral on Derive extends that utility further: holders can hedge their exposure, trade XRP volatility, or use strategies such as covered calls to generate option premium against assets they already own.
Watch the walkthrough for the full step-by-step execution on Derive.
