PUMP Traders Make Big Bets on the Token Surging Past Its ICO Price

The $PUMP ICO is one of the most anticipated events in crypto over the last few years. As such, it is bringing in all sorts of traders looking to make money off of its excitement, volatility, and highly successful sale.

Much of the activity has so far taken place in the perpetual futures markets, but options contracts are now getting involved that could provide big paydays if they land in the money.

PUMP Traders Make Big Bets on the Token Surging Past Its ICO Price

Crypto prime broker FalconX says that clients are using options contracts to make large wagers on the token’s price continuing to rise.

Action on Pump.fun’s yet-to-be-released PUMP (PUMP) token was already swift in the days before its watershed initial coin offering (ICO) on Saturday that saw it sell $500 million in tokens in just 12 minutes.

But almost the entirety of that pre-ICO activity was centered on the perpetual futures (perps) market, which is a cash-settled product on platforms such as Hyperliquid or Binance that lets traders get a form of spot price exposure to the asset, with leverage. On Hyperliquid, the PUMP perp is already up 33% since July 10 and it traded $628 million worth of contracts during that time. 

But that is now changing.

Crypto prime broker FalconX revealed exclusively to Unchained that the company has been brokering bespoke options trades over OTC desks for clients with a notional value in the hundreds of millions of dollars. 

Unlike futures contracts, which require a form of settlement at expiry either in cash or physical form, options contracts give the buyer or seller the right, but not the obligation to exercise the contract. This means that traders have the opportunity to structure highly lucrative trading strategies, if the contracts hit.

And Griffin Sears, head of derivatives at FalconX, says that its clients are using these contracts to make big bets on PUMP’s upside, reflecting overall industry optimism over its first major ICO in years. “We are seeing trader interest in far out-of-the-money call strikes, which suggests an expectation of significant price appreciation beyond the ICO price,” he said. 

Comparing Options v. Perps

With the ICO being widely oversubscribed, many traders have been forced to move into the derivatives market for exposure. 

Perps give traders linear exposure to the asset — meaning that you are betting on whether or not the spot price goes up or down. It is possible to add leverage to these positions in order to maximize gains (or losses), but these contracts limit certain types of sophisticated trading strategies.

Options on the other hand can be enticing for traders, especially during periods of volatility. For starters, risk is limited to the value of principal that is put up front in order to establish a notional position with leverage, and traders have no risk of liquidation. The worst that can happen is that a contract finishes out of the money, and it expires without any action taking place.

In the case of FalconX, the majority of the action is in call options, which are seen as bullish bets because they give the purchaser the right to buy an asset at a certain price. According to the company, short-dated call strikes are being sold in the range of 25% above the ICO price to as high as 150% above. FalconX did not disclose the amount of leverage being offered or the precise dates of expiration. But traders are using these options to create asymmetric levels of risk to the upside.

A Busy Next Few Days?

It is fair to expect a lot more action for the token, which is seen as a high-beta play on SOL despite some of its declining revenue numbers in recent months, at least until PUMP is officially released after a 48–72 hour holding period ends.  

“Demand for PUMP is far exceeding the allocation that clients are able to secure,” says Sears. “For some institutions, derivatives are the only way for them to secure full exposure ahead of the token distribution.”

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