SpaceX slides below IPO price as options traders split on sell-off

SpaceX shares fell 5.5% on Friday, extending a 10-session decline that took the stock to a low of $122.12, about 9% beneath its $135 initial public offering price, according to CNBC. The decline has cut the company’s market value to about $1.6 trillion and left the stock 44% below its intraday high of $225.64.

The reversal has also coincided with pressure in broader technology benchmarks. CNBC reported that the Nasdaq-100 was less than 1% below a record when SpaceX reached its high, and is now 6% below that level.

SpaceX, Elon Musk’s satellite and space exploration company, debuted on the Nasdaq on June 12, according to CNBC. Its early gains were followed by an additional $11 billion equity raise led by Wall Street underwriters including Morgan Stanley and Goldman Sachs, CNBC reported.

Options market shows stress and support

Trading in SpaceX derivatives remained active on Friday, though less dominant than during the stock’s earlier surge. CNBC reported that just over 500,000 SpaceX options contracts had changed hands by late morning, making it the 11th most traded options ticker in the market at that point. Activity in Micron, VIX products, the iShares Russell 2000 ETF and Apple exceeded SpaceX trading, according to CNBC.

Options give buyers the right, without the obligation, to buy or sell shares at a set price before expiration. Calls are typically used to express upside exposure, while puts are often used for downside exposure or hedging. Selling puts can also reflect willingness to buy shares at a lower effective entry price, though the seller takes on downside risk if the stock falls further.

SpotGamma data cited by CNBC showed that $350 million in SpaceX options premium traded Friday, with $290 million linked to puts. Seven of the 10 most active contracts by volume were puts, according to the same data.

That headline skew did not mean all flows were bearish. CNBC reported, citing SpotGamma and Cboe LiveVol data, that more than half of total put premium was sold, and that nine of the 10 largest trades by volume had bullish characteristics.

One large position reflected limited downside exposure rather than an outright short bet, according to CNBC. The trader bought $2.6 million of same-day $140 strike puts and sold the same number of $135 strike puts, reducing the trade’s cost by $1.6 million. That structure, known as a put spread, can profit from a decline toward the lower strike while capping gains below that level.

Retail demand meets valuation pressure

Don Kaufman, co-founder of TheoTrade and a former director at TD Ameritrade, told CNBC that many investors tend to feel they missed high-profile IPOs and may now see the pullback as an opening. “People always feel like they miss out on these IPOs, look at the positive side of it, now you can go in there and get as much SpaceX as you want,” Kaufman said.

Kaufman also told CNBC he was surprised that shares of the banks that led the transaction were not under heavier pressure. He said he had been selling far out-of-the-money puts and would buy SpaceX at $100, while noting that such a price would still leave the company valued above $1 trillion.

This story draws on original reporting from CNBC.