Spacex stocks rose 11 per cent to US$213.16 on Tuesday as a burst of options trading pushed the company’s market value to roughly US$2.8-trillion. The move briefly put Elon Musk’s company ahead of Microsoft and far above Amazon, even as technology shares were sliding elsewhere.
Options Trading Drives the Move
More than 500,000 options contracts changed hands in the first hour, and more than a million had traded by early afternoon. That flow helped lift turnover in SpaceX shares to US$52-billion, the highest among large U.S.-listed firms on Tuesday, after the company sold its record initial public offering last week.
Joe Saluzzi, co-head of equity trading at Themis Trading, said, "It’s a US$2.5-trillion company, but it certainly feels like one of those meme stocks, the way it’s trading," and added, "We’ve seen momentum in the past. They just tend to run and you have to be very, very careful with these types of names."
Microsoft, Amazon and a Wider Slip
SpaceX roared past Amazon’s market valuation and briefly topped Microsoft while the semiconductor index fell 3 per cent and the Nasdaq Composite slipped 0.5 per cent. CBOE Global Markets shares fell 8 per cent, CME Group shares dropped 2 per cent and Miami International Holdings lost 9 per cent, a sign that the move in SpaceX also landed in a trading complex already under pressure.
Brent Kochuba, founder of options analytics service SpotGamma, said, "If you’re a market maker, you can’t hedge SpaceX with anything else other than SpaceX," describing how the newly listed contracts can force more trading in the underlying shares. That leaves SpaceX’s valuation tied not just to the stock itself but to the pace of derivatives demand around it.
Musk, Futures and the Next Test
Michael Selig, chair of the Commodity Futures Trading Commission, said Monday on CNBC, "It’s time to approve regulated futures contracts that have no expiration date," and added, "We’re going to make sure the product’s available, but it’s well regulated here in the U.S." For SpaceX, the immediate question is whether the rush in options can keep drawing volume after a one-day jump that lifted its value by nearly US$1-trillion from last week’s record initial public offering.
