SpaceX Options Are Already as Liquid as Coinbase. Julia Spina Shows the Data After 8 Trading Days

Key Concepts

• Price Discovery: The process by which the market determines the fair value of an asset through the interaction of buyers and sellers.
• Implied Volatility (IV): A metric that captures the market's view of the likelihood of movement in a security's price.
• Open Interest: The total number of outstanding derivative contracts (like options) that have not been settled.
• Bid-Ask Spread: The difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept; a key indicator of liquidity.
• "Peloton Curve": A colloquial term used to describe a sharp, rapid run-up in price followed by a significant, sustained decline.
• Liquidity: The ease with which an asset can be bought or sold in the market without significantly affecting its price.

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1. Current State of SpaceX Trading

The trading environment for SpaceX has been characterized by extreme volatility. The asset experienced a rapid price surge followed by a sharp correction, with a 25% decline observed over a five-day period. The market is currently in a phase of "price discovery," attempting to establish a stable valuation.

• Option Activity: There has been a significant reduction in open interest. For the July 17th expiration, open interest dropped from 20,000 contracts on June 17th to 6,830, indicating that many traders are closing positions due to high volatility.
• Volume Trends: Trading volumes are tapering off from initial highs, suggesting a cooling-off period as the asset matures.

2. Liquidity and Market Comparison

Despite the volatility, SpaceX options have achieved a high level of liquidity in a very short timeframe.

• Comparative Analysis: When analyzing 59-day at-the-money puts, the bid-ask spreads for SpaceX are comparable to established, highly liquid underlyings such as Oracle (ORCL), Coinbase (COIN), and Salesforce (CRM).
• Nuance in Liquidity: The speakers emphasize that liquidity is not uniform. It varies significantly based on the strike price (further out-of-the-money options are less liquid) and time to expiration. Traders are advised to perform "sanity checks" on specific contracts rather than assuming the entire chain is equally liquid.
• Intraday Patterns: Consistent with broader market trends, liquidity is highest at the market open and close, with thinner liquidity during midday hours.

3. Strategic Perspectives and Outlook

The research team suggests that while the short-term environment is "choppy," the long-term outlook remains significant due to the company's scale.

• Long-term vs. Short-term: For those seeking exposure, a long-term approach is recommended to mitigate the impact of short-term price swings.
• Market Maturation: The speakers draw a parallel to Meta (formerly Facebook), which faced post-IPO struggles before eventually seeing significant long-term growth.
• Future Catalysts: The market expects continued "push and pull" dynamics driven by factors such as:
  • Inclusion in the Nasdaq index.
  • The expiration of lock-up periods.
• Risk Management: The primary advice for traders is to "keep your size in check" due to the high implied and realized volatility.

4. Notable Quotes

• "Liquidity with options is a much more nuanced concept... just really looking at bid-ask spreads, looking at open interest, looking at volume for specific contracts can be really helpful." — Julia
• "I have no doubt that SpaceX will be one of the most liquid products going forward with the options market, too. It's too big not to be." — Unidentified Speaker

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Synthesis and Conclusion

SpaceX is currently undergoing a volatile price discovery phase, typical of high-profile market entries. While the initial "Peloton-style" price action has cooled, the options market has demonstrated surprising depth and liquidity, rivaling established tech stocks. Investors are cautioned that while the product is highly tradeable, the combination of upcoming lock-up expirations and index inclusion will likely result in continued price "chop." Success in this environment requires careful monitoring of specific contract liquidity and disciplined position sizing.