By Steven M. Sears
Investors argue over everything, but Elon Musk has managed to convince millions of them that it's possible to live on other planets.
After completing the largest-ever initial public offering, his company, Space Exploration Technologies, is working to harness the power of the to create "truth-seeking artificial intelligence" to advance scientific discovery.
It's hard to know when that might happen, but investors are in a frenzy that was supercharged on Tuesday when SpaceX options started trading. Anyone can now use a little money to make big SpaceX stock bets.
So far, options trading patterns indicate extreme bullishness. While we think investors are best served waiting for the options market to mature over the next few weeks, we recognize that the temptation of a hot stock will be difficult for many to resist.
The enthusiasm over Musk's interplanetary ambitions, which extends to space tourism and asteroid mining (please take pictures), vividly contrasts with skepticism over the Federal Reserve's far more mundane goals.
Investors are arguing over interest rates and the independence of the new chairman, Kevin Warsh -- even though managing the U.S. economy is dramatically easier than Musk's intention to redefine humanity's understanding of space and time.
Creating SpaceX is a worthy lifetime achievement, and many have commented upon Musk becoming the world's first trillionaire. But he will be even richer if he achieves a few profound goals.
If SpaceX's valuation hits $7.5 trillion, and at least one million people live in a permanent Mars colony, Musk's first compensation package award will vest, according to Marc Andreessen and Michael McGuiness of Andreesen Horowitz, the venture-capital firm that helped make SpaceX possible.
If space data centers generate at least 100 terawatts of power, or more than 1,000 times all of Earth's data-center consumption, Musk's second compensation award vests.
If Musk fails, he only earns his $54,080 salary, or about half of what unionized hotel housekeepers make in Manhattan. It's early, but stock and options trading indicates investors think he will succeed.
SpaceX's stock is trading well above its $135 IPO price. Call options, which increase in value when stocks advance, are extraordinarily active and are attracting buyers even though prices are obscenely expensive.
Implied volatility is around 115%, indicating the stock is priced as if it will move 7.2%, up or down, each day. A call spread strategy, which entails buying a call and selling another with a higher strike price but the same expiration, is one way to manage SpaceX's high options prices. It positions investors to profit from a stock rally and offsets the elevated implied volatility that now defines SpaceX calls.
With SpaceX's stock at about $201.80, an aggressive investor could buy the July $205 call for about $22.80 and sell the July $245 call for about $11.20. If SpaceX stock is at $245 or higher when the calls expire on July 17, investors will realize a maximum profit $28.40.
The fervor to buy SpaceX's options, despite the extraordinary greed premium, shows no sign of abating.
On any given day, about 61 million options trade as more people use puts and calls like lottery tickets, which have a similar payout structure that enables gamblers to risk a little money to maybe make a lot. When Amazon went public, one million contracts was a big day.
SpaceX will almost certainly join Apple, Meta Platforms, Nvidia, and the other big technology stocks that dominate options trading.
The stock also is destined to join the exchange-traded funds that use options to magnify daily stock price changes. The growth in those products is as stunning as it is rarely remarked upon. U.S. notional volume of levered ETFs is about $90 billion, up from almost nothing a decade ago, per Goldman Sachs data.
Should Musk never make it to Mars, of this he can be certain: SpaceX is destined for stardom on Earth. Billions of dollars are betting on it.
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(END) Dow Jones Newswires
June 17, 2026 01:00 ET (05:00 GMT)
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