How SpaceX’s Nasdaq Inclusion Might Affect Options Pricing

SpaceX’s stock has been known for its erratic price swings since its inception. Its upcoming inclusion in the Nasdaq 100 index is expected to bring even more volatility, but the impact may not be as dramatic as some predict.

Nasdaq’s rules limit the weight of low-float stocks, which means SpaceX won’t single-handedly send the index into a tailspin. However, this doesn’t mean that options traders will be immune from the excitement. In fact, data suggests they’re already salivating at the prospect of trading SpaceX options: over 300,000 calls have traded in just one day, with almost five times as many calls bought as puts.

The real question on everyone’s mind is what this means for options pricing. With SpaceX’s implied volatility standing at a whopping 92 – almost three and a half times that of the QQQ – it’s clear that traders are pricing in some serious uncertainty. But will this volatility persist in the long term?

Historically, companies with high volatility have tended to come back down to earth eventually. As investors flock to index funds, which tend to be more stable and long-term focused, one would expect SpaceX’s volatility to decrease as it becomes a more established member of the Nasdaq 100.

However, there are several counterpoints to this argument. Passive index buyers may use SpaceX options to hedge their bets, keeping demand for puts elevated. Moreover, high volatility has been a hallmark of many bull market winners, making call-selling an attractive income source – and increasing options volume in the process.

This raises some interesting questions about what we can expect from SpaceX’s inclusion in the Nasdaq 100. Will its volatility stay sky-high, or will it eventually come back down to earth? One thing is certain: with over $500 billion in assets under management in the Invesco QQQ fund, and hundreds of thousands of options trading hands every day, this is a story that’s far from over.

Tesla traders are all too familiar with the wild price swings that come with owning shares in Elon Musk’s electric empire. While it’s true that Tesla has consistently been one of the most active stocks for options traders, this hasn’t necessarily translated into long-term stability. Will SpaceX follow suit, or will its inclusion in the Nasdaq 100 help to stabilize its price swings?

Options trading is all about managing risk – but also about capturing gains. As traders buy and sell calls and puts on SpaceX’s stock, they’re essentially betting on whether the company will continue to soar (or plummet). This creates a self-reinforcing cycle: as more traders jump into the fray, prices become even more volatile.

But what are the implications of this for investors who don’t trade options? Does it mean that they should steer clear of SpaceX’s stock altogether, or can they trust in its long-term potential?

As we look ahead to the next few weeks and months, one thing is certain: volatility will be at the forefront of every investor’s mind. With SpaceX’s inclusion in the Nasdaq 100, options traders are going to have a field day – but what about the broader market? Will this lead to increased stability, or simply more wild price swings?

As we navigate the choppy waters of the stock market, one thing is clear: SpaceX’s inclusion in the Nasdaq 100 is just the beginning. With hundreds of thousands of options trading hands every day, and over $500 billion in assets under management, this story is far from over.

And so as we wait with bated breath to see what the future holds for Elon Musk’s latest venture, one thing is certain: volatility will be the name of the game – at least until SpaceX comes back down to earth.