The Figma IPO Frenzy: Retail Exclusion and the High-Stakes Game of Post-IPO Options Trading

Figma's 2025 IPO was a masterclass in market theater. The design software giant's stock surged 250% on its first day of trading, closing at $115.50 from an IPO price of $33. This 255% pop—far outpacing even the already eye-popping returns of Circle's 168% IPO surge—cemented Figma as a symbol of the SaaS boom and the enduring allure of tech IPOs. Yet beneath the headlines of “blockbuster” returns lies a deeper story: one of systemic inequity in IPO allocations and the precarious balance between retail investor exclusion and speculative options trading.

The Allocation Problem: Institutional Favors and Retail Exclusion

Figma's IPO was oversubscribed 40 times, yet retail investors were effectively shut out. The underwriters—Morgan Stanley, Goldman Sachs, and others—allocated shares almost exclusively to institutional clients, a practice that has become the norm in modern IPOs. These institutions, often long-term partners of the underwriters, secured shares at $33 and flipped them for 250% gains within hours. Meanwhile, retail investors, who had helped build Figma's user base through organic adoption, were left to buy shares at inflated prices post-IPO.

This institutional bias is not unique to Figma. The IPO process remains a gatekeeping mechanism, where relationships and financial clout determine who gets to participate in the initial pricing. For Figma, this meant that the company's valuation was artificially depressed. If the IPO had priced closer to actual demand—say, $90 per share—it could have raised $5.5 billion instead of $1.2 billion. The underpricing left billions in unrealized value on the table for Figma and its shareholders, while institutional investors pocketed the difference.

The Post-IPO Volatility Playbook: Options as a Retail Workaround

For retail investors, the lack of IPO access has led to a surge in interest in options trading as a way to capitalize on post-IPO volatility. Figma's stock, trading at a 68.6x price-to-sales ratio, is a textbook example of a high-risk, high-reward asset. Options strategies like long straddles and iron condors have become popular among retail traders, who bet on the stock's dramatic swings.

A long straddle, for instance, involves buying both a call and a put option at the same strike price. This strategy allows traders to profit from large price movements in either direction—a critical feature for a stock like Figma, which has seen a 27% drop on its third trading day after a 27.4% surge. Iron condors, which limit downside risk by setting price targets, are also gaining traction. However, these strategies require a nuanced understanding of options mechanics and the discipline to adjust positions in real time.

The risks are significant. Figma's valuation is fragile, and any slowdown in growth or competitive pressures could trigger a sharp correction. The stock's 40% pullback in the weeks following its IPO highlights the dangers of overvaluation. For retail investors, the allure of quick gains must be tempered by the reality of leveraged losses.

The Lock-Up Looming: A Volatility Catalyst

The expiration of Figma's 180-day IPO lock-up period in late January 2026 is a critical inflection point. This event will unlock approximately two-thirds of the company's shares, held by insiders and early investors, for public sale. Historically, such lock-up expirations have led to sharp price corrections as selling pressure increases. For Figma, this could mean a flood of shares hitting the market, potentially driving the stock down to levels closer to its intrinsic value.

Retail investors and options traders must prepare for this volatility. Short-term options strategies with near-term expiration dates may offer a way to hedge against the expected price swings. However, holding options positions for extended periods is risky, given the stock's sensitivity to macroeconomic factors and competitive dynamics.

The Bigger Picture: A Broken System and a Retail Dilemma

Figma's IPO is a microcosm of a broader issue in the IPO market. The allocation system prioritizes institutional investors, who benefit from discounted pricing and guaranteed liquidity. Retail investors, meanwhile, are left to chase gains in a market that has already priced in the best-case scenario. This imbalance not only distorts capital formation but also erodes trust in the fairness of the system.

For investors, the lesson is clear: the IPO of a hot tech company is rarely a buy-and-hold opportunity. The first-day pop is often a one-time event, and the subsequent volatility requires active management. Retail investors should treat post-IPO options trading as a speculative bet, not a core holding. Discipline—setting stop-loss limits, avoiding over-leveraging, and diversifying portfolios—is essential.

Final Thoughts: Caution in the Midst of Hype

Figma's IPO has created a unique environment for options traders, but it also underscores the fragility of high-valuation tech stocks. The company's strong fundamentals—46% revenue growth, 132% net dollar retention, and a product-led growth model—are impressive. Yet these metrics must be weighed against the risks of overvaluation, competitive threats, and the structural challenges of a dual-class share structure.

For those willing to navigate the volatility, Figma offers a rare chance to participate in a high-growth story. But for most investors, the key takeaway is to approach such opportunities with caution. The IPO market is a game of relationships and access, and retail investors must find creative, yet disciplined, ways to play within its constraints.

In the end, Figma's story is not just about a stock—it's about the evolving dynamics of capital markets and the enduring tension between institutional power and retail participation. As the lock-up period nears, the real test will be whether the market can stomach the next chapter of this high-stakes drama.