Why I Won’t Touch SpaceX Options For A Few More Days

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The most exciting options in the market right now are the ones I am avoiding.

SpaceX (SPCX) options started trading this morning, and the whole market is completely and utterly infatuated with the thing. People are even selling Intel (INTC) and the semiconductors just to throw money at it. 

I get the temptation. 

The single biggest IPO in history finally has options on it, and you want in. Let me tell you why I am sitting on my hands for a few more days, because the why is the lesson.

A brand-new issue does not have a real options market yet. It has the skeleton of one. 

The bid-offer spreads in there are so wide you could drive a truck through them, and there are no weekly options listed yet, though those will get pressured onto the board in a couple of days.

Here is what most people do not understand about why it is such a mess. 

The big market-making firms, the Jane Streets and Virtus (VIRT) and Citadels of the world who hate each other’s guts and compete for every penny, are not comfortable making tight markets in a name this new. 

It takes time for them to get confident. Until they do, the market in there is going to suck, and you are the one who pays for it on every fill.

Then there is the volatility, and this is the part that should stop you cold. 

The implied volatility in SpaceX is all over the place. Some of these strikes are printing absurd, cartoonish volatility numbers that have nothing to do with reality. 

I looked at the call skew in there in real time, and I do not think I have ever seen a call skew that big, and I do not think I have ever seen one get crushed that fast. 

There is somebody out there selling premium up in the nosebleeds who is going to find out the hard way what happens when it theoretically turns into the biggest gamma squeeze of all time.

The point is simple. When the volatility is unreadable, you are not trading, you are guessing, and the house has a much better idea of the real number than you do. 

Do not listen to me on it, just pull up the implied volatility and read it yourself. It is screaming that nobody knows what this thing is worth yet.

This is what I call retail amateur hour, and it is not an insult. It is just what the first few days of any blockbuster IPO look like before the machine settles down. 

The pros are not in there swinging. They are waiting for the spreads to tighten, the weeklies to list, and the volatility to come back to earth.

So here is the discipline. 

A stock with no history gives you no edge, and an options market this raw gives the edge to the other side. Let the thing trade for a while. Let it build some price memory. 

The opportunity is not going anywhere, and the version of it that shows up in a couple of weeks will be one you can actually price.

I will be breaking down the SpaceX options every day this week as the market matures, including the moment it actually becomes tradable.