SpaceX’s new options market exploded on Tuesday, giving traders a fresh and far riskier way to bet on the rocket company’s post-IPO surge.
The contracts began trading only days after SpaceX’s blockbuster Nasdaq debut, and demand was immediate.
Call options, which profit when a stock rises, dominated early activity. But the pricing also showed something more complicated than simple excitement.
Wall Street is now bracing for a huge move in either direction, with traders seeing room for another sharp rally while also preparing for a painful reversal.
A blockbuster IPO sets the stage
SpaceX priced its IPO at $135 a share last week, already making it one of the most closely watched listings in market history.
Since then, the stock has climbed roughly 50%, lifting the company’s market value past Amazon and briefly above Microsoft during Tuesday’s trading.
That speed matters, as normally, a stock needs time to settle after going public.
In SpaceX’s case, investors have rushed in almost immediately, helped by the company’s rare mix of space launches, Starlink, defence contracts, artificial intelligence ambitions, and Elon Musk’s personal following.
The rally has also created pent-up demand among investors who either received small IPO allocations or missed out entirely. For them, options offer another route in.
An option is a contract that gives the buyer the right, but not the obligation, to buy or sell a stock at a fixed price before a set date.
A call is a bet on upside. A put is protection, or a bet, against downside. With SpaceX moving so fast, both sides have become expensive.
Options debut like a rocket launch
The scale of Tuesday’s options debut was striking. Around 1.8 million SpaceX options contracts changed hands, far above Meta’s previous first-day options record in 2012.
Calls outpaced puts, showing that bullish demand remained strong even after the stock’s dramatic run.
Susquehanna said SpaceX had the fifth-highest call volume of any stock that day.
Data from Trade Alert indicates that SpaceX options were the third-most heavily traded single-stock contracts overall, behind only Tesla and Nvidia.
“It’s unusual in history for companies to have options trade so quickly,” Mike Khouw, chief strategist at YieldMax ETFs, told Yahoo Finance.
“This is the third busiest single stock options contract trading today.”
The bigger story was not just volume. It was 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.
That is what traders mean when they talk about “tails.” It refers to extreme outcomes at either end of the range.
In this case, the market is saying SpaceX could keep ripping higher, or crack sharply, and neither outcome looks remote.
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‘Too dangerous to sell’: Wall Street’s warning
That two-sided risk is why derivatives strategists are sounding cautious, even as volume booms.
“The tails look too expensive to buy, but they also look too dangerous to sell,” Chris Murphy, a strategist at Susquehanna, said in comments cited by CNBC.
The line captures the problem 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, because 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.
Reuters reported that one large September trade appeared to hedge against the stock falling below $205, likely linked to future share supply after IPO lock-up restrictions ease.
Sceptics say the valuation already leaves little room for error.
“Investors rarely make money buying stocks valued at over 100x revenue,” short seller Jim Chanos told Yahoo Finance, while still acknowledging that Starlink is “a real business.”
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