SpaceX shares jumped 8% to $171 on Monday, pushing the stock nearly 50% off its lows and back above its IPO price. Options volume doubled as traders piled into calls, but implied volatility is running far below June's debut levels, suggesting a steadier climb this time.
SpaceX shares jumped 8% to $171 on Monday, extending a run that has lifted the stock nearly 50% off its lows and back above its IPO price. The rally also made CEO Elon Musk a trillionaire again, coinciding with the Nasdaq 100 Index hitting its own record highs.
Options traders pile into calls
Options volume on Monday was twice the 30-day average, with 1.7 million contracts worth a total $900 million changing hands, including 1 million calls worth more than $640 million. Traders likely bought 456,000 calls against fewer than 240,000 puts, according to Cboe LiveVol data, while also selling 250,000 puts and 295,000 calls.
Even so, market-makers are pricing puts with implied volatility equal to or higher than calls, Barchart data shows — a sign downside swings are seen as just as likely as further upside. By comparison, Nvidia calls trade richer than puts in many expiries, reflecting investor worry about missing rallies rather than avoiding declines.
A calmer rally than June's debut
The enthusiasm echoes SpaceX's June trading debut, but after seven weeks confined to a 10% price range, implied volatility is now far lower. It took SpaceX less than three full sessions to run from $171 to an intraday high above $225 after its June debut, when implied volatility topped 110. Today it sits at 55, up from an all-time low below 50 last Thursday.
As a result, market-makers assign less than a 50% chance SpaceX touches $225 between now and July, while closer-dated pricing puts a 54% chance on the stock touching $185 by the end of this month.
Catalysts stacking into year-end
Morgan Stanley analyst Adam Jonas reiterated a $300 price target on Monday. The firm's overweight rating and $300 target had already fueled gains earlier in the rally. Last Thursday, SpaceX's Falcon 9 rocket delivered four astronauts to the International Space Station in under eight hours, a record. Separately, softer-than-expected US nonfarm payrolls data cut the odds of a Federal Reserve rate hike to 20%, adding a macro tailwind for risk assets like SpaceX stock.
The 30-day correlation between SpaceX and Tesla currently stands at 0.66, according to ThinkOrSwim data. According to Charles Moon, a technical and momentum trader at Prosper Trading Academy in Chicago: "SpaceX and Tesla are feeding off each other." Tesla reported Q3 deliveries of 486,532, beating Wall Street's estimate of between 457,000 and 463,000, a result that fueled slight gains for SpaceX shares as well.
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