SpaceX (SPCX) rose 4% in Tuesday premarket trading to $200, extending momentum into its third session after listing last Thursday and starting to trade on Friday. The shares were priced at $135 and have climbed 19% for two straight days, finishing Monday at $192.50. In early Tuesday trading the stock touched $214.62 before easing to about $201 just ahead of the open.
US index futures were mixed: S&P 500 and NASDAQ futures were lower, while Dow Jones futures added roughly a quarter of a percentage point. That followed Monday’s moves, when the NASDAQ gained 3.1% and the S&P 500 rose 1.7% after the Trump administration said it had completed a peace deal with Iran that would reopen the Strait of Hormuz. WTI fell 4% on Monday and slipped another 4% early Tuesday. Separately, SpaceX said it will pay $60 billion for Anysphere, owner of the Cursor AI coding assistant, with completion expected in Q3. The company is trading with a thin float of about 4%, and its market capitalisation is above $2.5 trillion, on par with Amazon (AMZN).
Options Volatility And Trading Strategies
We are seeing SPCX stock’s explosive debut, but the real story for us is the extreme implied volatility in its options chain. With a float of just 4%, any news can cause massive price swings, making these options incredibly rich in premium. This environment is less about picking a direction and more about trading the volatility itself.
For those believing the momentum continues, buying outright calls is expensive due to that high volatility, which is likely trading well above 150%. A better approach might be using bull call spreads to cap the upfront cost and define the risk. This strategy profits from a continued rise but protects against the inevitable volatility crush if the stock trades sideways.
However, we must consider the potential for a sharp pullback, as seen with other high-profile IPOs like Rivian, which lost over 80% of its value in the year after its initial surge in 2021. The skepticism around the satellite-to-cell business model provides a solid basis for this view. Buying put options or establishing bear put spreads could be a profitable hedge or a direct bet on a correction back towards reality.
Given the elevated options pricing, we see an opportunity in selling premium if we believe the stock will consolidate in the coming weeks. Strategies like short straddles or iron condors could benefit from time decay and a decrease in volatility. However, the risk is substantial, as any unexpected news from Musk could lead to huge losses.
Broader Market Context And Implications
The broader market context adds another layer to our strategy. The 8% drop in oil prices over the past two days reduces inflation fears, which typically supports high-growth tech valuations like SPCX. Yet, with the S&P 500 and NASDAQ showing weakness, we should be cautious that a market-wide risk-off event could easily halt SPCX’s rally, regardless of company-specific news.
