SpaceX (SPCX) fell 10% on Monday, extending its decline to a third session after three initial gains following its 12 June IPO at $135. The shares had hit a record $225.64 last Tuesday before sliding to an intraday low of $165.00 on Monday, as US benchmarks weakened, with the Nasdaq Composite down about 1.2% by early afternoon while the S&P 500 slipped 0.3%, and the Dow Jones Industrial Average added 0.3%. The stock’s early run included rises of more than 19% in each of the first two sessions, even as attention turned to dilution risks, including projections that the float could expand by about 1,000% over the next three months.
Separately, the company said it had secured a contract tied to xAI under which start-up Reflection AI would pay up to $150 million per month to rent Nvidia GB300 chips, an arrangement that could run through 2029 and generate up to $6.3 billion in revenue. The lock-up schedule points to further supply: about 20% of insider-held shares are due to unlock in mid-August after the first earnings release, a further 10% if the stock stays above $175, and then 7% on both 21 August and 10 September, lifting the float from about 4% to about 44% by September. Oppenheimer’s Tim Horan maintains a $250 target, citing a $1 trillion revenue goal by 2030 and an implied $10 trillion valuation at roughly 10 times sales.
Share Unlock Risks And Option Market Dynamics
Given the high volatility in SpaceX (SPCX), we see the current situation as a conflict between strong fundamental news and a significant technical overhang. The stock has fallen over 25% from its peak, yet the new $6 billion AI contract provides a substantial long-term revenue stream. The CBOE NASDAQ-100 Volatility Index (VXN) has also ticked up to 29.5, showing broader nervousness in the tech sector compared to the VIX at 19 for the S&P 500.
The upcoming share unlock is the most important factor for us to watch over the next three months. We are concerned about the float increasing from 4% to 44% by September, as early investors may be eager to take profits. Historically, stocks like Meta (formerly Facebook) saw their shares fall over 6% on the day its first major lock-up expired in 2012, setting a precedent for this kind of supply-driven pressure.
Because of this, we believe purchasing put options with expiration dates in late August or September is a prudent strategy. This allows us to bet on a price drop as the new shares become available to sell on the open market. These puts act as insurance or a direct wager that the increased supply will push the stock price lower, potentially retesting its post-IPO lows.
Volatility Strategies And the Bull Case
However, the stock’s wild price swings mean that implied volatility is extremely high, making options expensive. We’ve noted that implied volatility for SPCX options is pricing in daily moves of over 5%, far exceeding that of other tech giants. Therefore, a long straddle, which involves buying both a call and a put option with the same strike price and expiration date, could be an effective way to profit from a large price move in either direction.
On the other hand, the $6 billion contract cannot be ignored and may attract a new wave of institutional buyers who can absorb the insider selling. For those of us with a bullish outlook, buying call options is a way to bet on the price recovering and breaking its previous highs. Still, we must be cautious about the high premiums, which increase the break-even price for the trade to be profitable.
To manage the high cost of options, we are also considering using debit or credit spreads. A bear put spread, for example, would allow us to bet on a limited downside move for a lower cost than buying a put outright. This strategy would cap our potential gains but also significantly reduce our upfront risk in what is shaping up to be a very unpredictable summer for the stock.
