SpaceX‘s initial public offering (IPO) has set the stage for a dramatic surge in options trading. The company, which priced its IPO at $135 per share last week, has seen its stock climb roughly 50% making it one of the most closely watched listings in market history. This rapid ascent has sparked intense activity in the options market, with traders eager to capitalize on the stock’s volatility.
The options market for SpaceX debuted with a bang on Tuesday, with around 1.8 million contracts changing hands. This volume far surpassed Meta’s previous first-day options record set in. The demand for call options, which profit when a stock rises, dominated early activity, indicating strong bullish sentiment even after the stock’s dramatic run.
Options debut like a rocket launch
The scale of Tuesday’s options debut was striking. Data from Trade Alert indicates that SpaceX options were the third-most heavily traded single-stock contracts Mike Khouw chief strategist at YieldMax ETFs, noted that it’s unusual for companies to have options trade so quickly. “This is the third busiest single stock options contract trading today,” he told Yahoo Finance.
The bigger story was not just the volume but what the options prices implied about future movement. Susquehanna estimated that the market was pricing roughly a 15% chance that SpaceX rises another 50% over the next three months. It was also pricing a similar chance that the stock loses half its value over the same period. This two-sided risk is why derivatives strategists are sounding cautious, even as volume booms.
Wall Street’s cautious stance
“The tails look too expensive to buy, but they also look too dangerous to sell,” said Chris Murphy a strategist at Susquehanna, in comments cited by CNBC. This line captures the dilemma facing traders. Buying options is costly because implied volatility is high. Implied volatility is the market’s estimate of how violently a stock may move. But selling options can be even riskier, as a sharp move either way could leave sellers exposed to steep losses.
On the upside, call buyers are betting SpaceX can repeat the kind of momentum seen in Tesla during its most speculative phases. On the downside, put demand reflects concern about valuation, lock-up expiry risk, and the possibility that early excitement fades once more shares become available. Jim Chanos a short seller, told Yahoo Finance that investors rarely make money buying stocks valued at over 100x revenue while still acknowledging that Starlink is “a real business.”
SpaceX’s market valuation surge
SpaceX’s market valuation has been on a rollercoaster ride. On Tuesday, the company’s shares were up 11% at $213.16 giving it a market value of roughly $2.8 trillion—nearly $1 trillion more than its value when it sold its record initial public offering last week. This rapid ascent has made SpaceX one of the most valuable companies in the world, briefly surpassing Amazon and Microsoft.
The surge in options volume can sometimes cause the underlying stock to swing as options dealers, who facilitate trading by taking the other side of options trades, buy and sell shares to square their own risk. Brent Kochuba founder of options analytics service SpotGamma, noted that if you’re a market maker, you can’t hedge SpaceX with anything other than SpaceX.
Analysts and portfolio managers have advised investors to brace for volatility due to the relatively small float and high valuation of SpaceX. The company reported sales of $18.67 billion last year and a net loss of $4.94 billion after merging with money-losing xAI. This puts its price-to-sales ratio at more than 150 compared with a trailing 12-month price-to-revenue ratio of 20 for Nvidia, the largest U.S. company by market value.
