SpaceX options debut set to drive heavy derivatives trading

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SpaceX options trading debut

Highlights

SpaceX options begin trading Tuesday on Cboe Global Markets, expected to attract heavy volume following the stock's post-IPO surge above $2 trillion market cap.
High implied volatility anticipated for SpaceX options, with the stock up over 25% to $172 since its $135 IPO, raising costs for both bullish and bearish trades.
Trading activity may increase around SpaceX’s first quarterly report and potential early inclusion in major indexes like Nasdaq 100 and MSCI, though S&P 500 fast-track is ruled out.

Options launch follows blockbuster listing

As reported by Reuters, Cboe Global Markets expects options on SpaceX to begin trading Tuesday, opening the door to activity from shareholders seeking downside protection and traders positioning for swings in the stock.

Options give holders the right, but not the obligation, to buy or sell shares at a set price within a specific period. They typically begin trading within days of a stock’s debut, and market participants expect SpaceX to attract unusually strong early volume because of the company’s size, profile and investor interest.

SpaceX opened at $150 on Friday, above its $135 IPO price, and trades around $172 in afternoon activity after jumping more than 25%. That move lifts its market value above $2 trillion, making it the sixth-largest U.S. company by market capitalization.

Ophir Gottlieb, chief executive of Capital Market Laboratories, says he expects explosive demand, while Chris Murphy, co-head of derivatives strategy at Susquehanna, says questions about the listing date for the options have exceeded those for almost any IPO he can recall.

Volatility outlook and index catalysts

Investors and analysts expect the options to be volatile and likely expensive, particularly if SpaceX shares trade more like Tesla, Elon Musk’s electric vehicle company, than the broader market. Tesla’s five-year beta is 1.81, according to LSEG data, where a reading of 1 indicates volatility in line with the market.

Seth Hickle, chief investment officer at Mindset Wealth Management, says he expects substantial volatility in the underlying stock and very high implied volatility in the options. That dynamic could raise the cost of bearish and bullish positioning alike, even as it draws in short-term traders.

Trading interest could also build around upcoming corporate and index events, including SpaceX’s first quarterly report as a public company and potential inclusion in major equity benchmarks. Nasdaq has adjusted its rules to ease SpaceX’s entry into the Nasdaq 100, MSCI says it will apply early inclusion rules for large IPOs, while S&P Global has ruled out fast-track entry into the S&P 500.

Options may also give skeptics a cheaper-defined alternative to shorting the stock outright, though analysts caution that bearish trades still may not come cheaply in a thin float. Luke Lango of InvestorPlace says direct short positions can carry theoretically unlimited risk, high borrow costs and the danger of a short squeeze.

We previously reported on how SpaceX’s blockbuster IPO debut reshaped trading across the broader U.S. space sector, sparking profit-taking and portfolio rotation even as SpaceX shares surged to a valuation above $2 trillion. That pullback hit several listed space names and ETFs, with analysts pointing to valuation concerns and investors reallocating capital to make room for SpaceX in portfolios.

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