SpaceX Stock Analysis: Options Skew & Volatility — Full Breakdown & Transcript

[00:02] consider buying SpaceX for their kids. Let's check it out. SpaceX is trading near lifetime lows and today a 101 billion worth of shares become eligible for trading, more than doubling the stock's public float.

[00:15] Virtually every buyer since the IPO is underwater. The stock is roughly 51% off of its high, IPOing around 150, trading around 110 right now. Buy it for your kids is a real position with a real cost. It means holding a stock that just

[00:30] lost $115 a share for a decade or more and the options market is currently pricing SpaceX at 75% implied volatility for the next year alone. So, which is it? Is Cramer describing a generational entry at the moment for everyone else

[00:44] having given it up or is buy it for your kids just what people say when a stock can't be defended on a one-year view? Let's check it out on today's edition of options math check. So, yeah. I mean, there's a lot of

[00:58] people that are long-term bullish on SpaceX, short-term bearish. This has been a super bearish move here after opening around 150, chopping all the way up to 225 and then immediately giving up the gains, trying

[01:10] again and then selling off, selling off, selling off. What is interesting though is, you know, everyone is so bearish on this thing that there's so many people that are kind of fear-mongering around the fact that the public float could

[01:23] create more selling and and really the release of those shares could create people are seeing it as an opportunity. This could be one of the biggest volume days for SpaceX. If you look at the first IPO day, we had 500 million shares

[01:36] traded, which is absolutely nuts, and then 250 million and then 323 million after that. We haven't been able to eclipse much more than that since then, but we are 2 and 1/2 hours into the trading day

[01:50] and we've already almost gotten to yesterday's trading volume of 200 million. We're at 147 million right now. So, I think this could be one of the biggest days we've seen in SpaceX. I think the market is also pricing in the

[02:03] and you can kind of see it here. I believe there's another one in September and another one in late August. So, you can see 100% implied volatility in the August cycle, 88% implied volatility in September, 86 in October, and then it

[02:19] drops pretty dramatically down to the low 80s, high 70s as you go further out more volatility here in the near-term cycle, which shouldn't surprise anyone given the crazy moves we've seen in SpaceX.

[02:32] But, I think this is an interesting scenario where you've got 50% discount on a stock trading at 110 where it IPO'd at 150. The same thing happened in Meta. Meta was a terrible IPO. It was just trading at the lows and now if you look

[02:47] back, Meta was one of the best buys you could have had at that point in time trading significantly higher than the IPO price. So, I think you could see this same sort of scenario play out in SpaceX. Of course, the more SpaceX

[03:02] gets involved with exploration, which, you know, they're the leader in that space, but I think really down the line, there's plenty of reasons to believe in SpaceX and I actually have a position all the way out in the 533-day cycle.

[03:16] I've got a super bull on here. I sold a put to buy a 300 strike call and I did that for a $300.50 credit. So, anywhere above 125, I'm good, but if we really do explode up to 200, 250, 300, this could be a $10,000 winner

[03:32] now. But, either way, let's check out the options probabilities here for September and then let's look at like the rest of the year as well. I think what you'll be interested to see is plenty of call skew

[03:46] here, which shouldn't shouldn't be a shock. I mean, if you look at the 90 strike put option trading for $4, that's about 20 points out of the money. And then you look at the 130 strike up here, you're trading for double that value. So

[04:01] the velocity risk is certainly priced into the upside. That's all skew really tells you is where the market perceives a big move risk to be. And with a premium twice as much as the downside on the 130 call relative to the 90, it's

[04:15] very clear that the market's risk perception is to the upside in terms of a big velocity move. If you look further out in time, we can look at December, it's going to be even more exaggerated here if we look at the same

[04:27] strikes. The 90 is trading for $9. The 130 is trading for $14. So plenty of premium. And if you go even further out in time, if you went out to like the 210, this thing is still trading for almost $400, 100 points

[04:43] higher than where we're currently trading. And obviously the premium for worthless. So not necessarily a fair assessment from an equidistant standpoint, but it just goes to show that the options down at

[04:57] 10, 20, 30, 40 are worthless, while the options that are 100% higher are trading for hundreds of dollars. And you can see that's still the case even if you go to the 300 strike. This thing is This thing is still trading for a dollar. So

[05:10] plenty of premium to the upside. I think it creates a scenario where especially for long-term positions, you have the ability to create strategic benefits in terms of the strategy selection. So like call ratio spreads

[05:26] to the upside. They're all going to be really cheap relative to notional benefiting you and giving you the ability to create super wide trades.

[05:38] So I think it's a blessing if you have SpaceX at 100 where it IPO'd at 150, especially given the call skew nature of this product. You could sell a put and buy a call spread super wide for a credit similar to what I did with the

[05:52] the short put to buy a call, but either way, this is a scenario where the near-term IPO failure, if you will, doesn't doesn't tell you anything about the company and the the ability for that company to

[06:06] create returns down the road. So, I'm a believer in SpaceX. I think we'll see the stock price much higher eventually, but in the near-term with all the chop, going to see much more volatility. The market is telling us we should expect to

[06:19] see much more volatility and the call skew is telling us if we're going to see a big move now, especially after a 50% haircut from the IPO price, it's probably going to be to the upside. So, we'll see what happens, but let me

[06:32] know what you think about SpaceX in the comments below. Always join us on the checking out your comments and trade ideas. So, join us there as well. Like this video, subscribe to the tastytrade channel, and we'll see you on the next

[06:45] channel, and we'll see you on the next Options Math Chat.