SpaceX is set for fast-track inclusion in the Nasdaq-100 on Tuesday, while its entry into the S&P 500 remains at least a year away. Because the two indexes have already diverged sharply on volatility this year, adding a stock known for dramatic moves could keep that gap wide.
The Nasdaq-100 is already running far more volatile than the S&P 500, and it is about to absorb a stock famous for sharp swings. SpaceX is due for fast-track inclusion into the Nasdaq-100 on Tuesday, after Nasdaq relaxed its rules for index entry following the company's June 12 trading debut.
The volatility gap is widening
The Cboe Nasdaq-100 Volatility Index, ticker VXN, has surged around 43% this year through Thursday, according to FactSet data. That dwarfs the 8% jump seen for the Cboe Volatility Index, the VIX gauge tied to the S&P 500.
SpaceX's imminent inclusion in the Nasdaq-100 — but not the S&P 500 — could keep the volatility spread between the two indexes wide, an equity derivatives strategist at RBC Capital Markets said in a note emailed Sunday. S&P Dow Jones Indices declined to change its rules, so SpaceX will have to wait at least a year to join the S&P 500 given the index's profitability requirements.
A thin float amplifies the swings
Despite the turbulence, SpaceX shares still trade above their IPO price of $135 and opening price of $150. According to Renaissance Capital's Avery Marquez: "IPOs are inherently volatile, and especially in those early weeks" after a company goes public.
Part of the problem is scarcity of tradable stock. SpaceX carries a market value of more than $2 trillion, but only about 5% of its shares are publicly floated, which means heavy buying and selling can create sharper price shifts. Its shares finished 1% lower on Monday, even as the major U.S. benchmarks rose.
Broader market closed higher
The inclusion means SpaceX shares will soon be held by the Invesco QQQ Trust Series I ETF, which has around $489 billion of assets under management. That fund outperformed the major benchmarks on Monday with a 1.4% gain, FactSet data showed.
The S&P 500, Nasdaq Composite and Dow Jones Industrial Average all posted gains on Monday, though none matched the QQQ's move.
Source: MarketWatch
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