Options tied to SpaceX shares reflected both a strong upside and a sharp downside risk simultaneously on their first trading day. While the stock continued to rise after the IPO, the tension between market excitement and valuation concerns became more apparent.
According to Susquehanna’s assessment, the market assigned about a 15% chance that the stock would increase by 50% within the next three months, and a similar probability that it would lose half its value. The firm reported that SpaceX had the fifth highest call option volume of the day.
Supply Risk and Valuation Pressure
Susquehanna strategist Chris Murphy wrote that the largest trades increasingly appeared to be hedges against future supply risk. According to Murphy, the bullish call options reflected expectations of a new sharp rally, while the bearish put options pointed to risks related to post-lockup supply, valuation concerns, and the possibility of post-IPO enthusiasm fading.
Murphy noted that this situation created a challenging trading environment, with these options appearing neither cheap to buy nor safe to sell.
SpaceX shares continued to rise after the IPO, surpassing the IPO price by about 50%. This increase pushed the company’s market value past Amazon’s and brought it close to Microsoft’s valuation.
Investors Price in Excitement and Elon Musk Effect
Peter Boockvar, Chief Investment Officer at One Point BFG Wealth Partners, said investors are currently pricing in the company’s business story, momentum, excitement, and the interest surrounding Elon Musk. However, Boockvar emphasized that at some point, expectations need to align with fundamental indicators.
Boockvar added that if SpaceX justifies its valuation, there is room for further gains, but the current level is very high and the company will need to grow into this value. He noted this process could take several years.
Data from the first trading day provided a strong test not only of SpaceX’s performance but also of investors’ risk appetite. The option pricing clearly showed how intensely the short-term direction was being debated.
