Preface

In recent weeks, Solana's native token, SOL, has experienced an impressive surge, garnering attention from investors and traders. Since April 7, SOL has surged by 85%, dramatically outpacing bitcoin's rise. This upswing reflects a growing appetite for risk in both crypto and traditional markets, as SOL continues to garner significant interest from large options traders.

Lazy bag

SOL's rally is gaining momentum with significant backing from block traders eyeing further gains. The strategic purchase of call options with a $200 strike price shows optimistic sentiment for SOL's trajectory by the end of June.

Main Body

The past month has seen Solana's SOL token jump by 85%, far eclipsing the performance of other cryptocurrencies like bitcoin, which rose 40% during the same period. This exceptional growth has involved strategic activity from block traders, typically institutional investors executing substantial transactions over-the-counter. Their recent acquisition of June expiry call options at a $200 strike price on Deribit suggests they anticipate SOL's price increasing even further in the coming weeks.

According to Greg Magadini, the director of derivatives at Amberdata, the purchase of these options represents a significant bet, with 50,000 contracts totaling a premium of $263,000. Each options contract on Deribit equates to one SOL, allowing holders the ability to buy the cryptocurrency at a predetermined price, reflecting a bullish outlook.

The attractiveness of these call options was further enhanced by the annualized implied volatility (IV) being lower than SOL's usual levels, which hover in triple digits. This low IV implies a low cost for the options, providing traders with an attractive entry point.

The options market activity reflects a substantial demand, leaving market makers with a net negative gamma exposure at the $200 strike price. Typically, market makers manage this exposure by buying as prices ascend and selling as they fall, striving to maintain a delta-neutral position. This pursuit often contributes to greater market volatility, especially as SOL closes in on the $200 threshold.

Ultimately, the intersection of strong demand from institutional traders and the hedging activities of market makers suggests that volatility is likely to intensify, making SOL's journey to $200 a closely watched event in the cryptocurrency space.

Key Insights Table

Omkar Godbole, a Co-Managing Editor at CoinDesk, provides insights and analysis from Mumbai. With a background in finance and markets, Omkar's work includes previous roles at FXStreet and Mumbai-based brokerage houses.