The SpaceX Trade: Why Traders Are Looking at Google

Key Concepts

• SpaceX IPO: The highly anticipated initial public offering of Elon Musk’s space exploration company, reportedly scheduled for June 10.
• Proxy Investing: Using a publicly traded company (Google) as a substitute to gain exposure to a private entity (SpaceX).
• Circular Firing Squad (AI Industry): A term describing the high level of interdependence and cross-ownership among major tech firms (Google, Nvidia, Microsoft, Apple, Meta).
• Options Skew: A metric used to determine where the market is pricing risk (upside vs. downside) by comparing the premiums of out-of-the-money calls and puts.
• Put Credit Spread: A defined-risk options strategy involving selling a put at a higher strike price and buying a put at a lower strike price to collect a net credit.
• Theta: A measure of the rate of decline in the value of an option due to the passage of time (time decay).

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1. The SpaceX IPO and Market Context

The video highlights the upcoming SpaceX IPO as a major market event. The capital raised is expected to fund three primary pillars:

• Starlink: The satellite internet constellation.
• SpaceX AI: Artificial intelligence initiatives.
• Rocket Launches: Continued development and deployment of launch vehicles.

The speaker notes that while Elon Musk owns approximately 45% of SpaceX, the remaining equity is held by private equity firms, sovereign wealth funds, and tech giants like Google, which holds a 6–7% stake. This stake is estimated to be worth over $100 billion, making Google a significant, albeit imperfect, proxy for investors who cannot access the SpaceX IPO directly.

2. Trading Strategy: Google as a Proxy

Because buying Google stock directly is capital-intensive (requiring ~$18,000 for 100 shares), the speaker proposes using options to gain exposure to the potential upside generated by the SpaceX IPO.

Technical Analysis of Google

• Market Position: Google is currently trading at the lower end of its recent range, having underperformed alongside other AI-related stocks.
• Options Skew: By comparing the ask prices of out-of-the-money calls and puts (e.g., 10 points away from the $355 base price), the speaker identifies a "steep call skew." This indicates that the market is pricing in more risk to the upside, suggesting a bullish sentiment among market participants.

3. Methodology: The Put Credit Spread

To avoid the high capital requirements of buying stock or selling naked puts, the speaker outlines a Put Credit Spread strategy:

1. Selection: Sell the $350 put and buy the $345 put.
2. Capital Efficiency: This reduces the capital requirement to approximately $300, compared to $6,400 for a naked put or $18,000 for stock ownership.
3. Risk/Reward Profile:
   • Credit Received: $1.92 ($192 total).
   • Probability of Profit: 71% chance of making 50% of the max profit before expiration.
   • Theta Decay: The position generates approximately 60 cents of theta per day, benefiting the seller as time passes.

4. Key Arguments and Perspectives

• Interdependence Risk: The speaker acknowledges the "circular" nature of the AI industry, where companies own parts of each other. While this creates systemic risk, it also allows for indirect exposure to high-growth private ventures like SpaceX.
• Speculative Nature: The speaker emphasizes that this trade is not a guarantee of success. It is a speculative play based on the assumption that a successful SpaceX IPO could positively impact Google’s valuation.
• Risk Management: The speaker explicitly states: "This is not a trade recommendation. If you do decide to do this trade, understand you're taking it on your own risk."

5. Synthesis and Conclusion

The primary takeaway is that investors seeking exposure to the SpaceX IPO can utilize Google as a proxy due to its significant equity stake. Rather than purchasing the stock outright, which is capital-intensive, the speaker suggests a Put Credit Spread as a more efficient way to express a bullish view. This strategy leverages the current market "call skew" and provides a defined-risk approach to participating in the potential market excitement surrounding the SpaceX launch.