SPCX Options See Record Nearly 1.8 Million Contracts on First Day of Trading as Institutions Lock In Gains at Zero Cost
Alina Collins
SpaceX options debuted with nearly 1.8 million contracts traded on day one — an all-time IPO options record. Institutions used sky-high implied volatility to hedge for free; retail traders paid steep premiums chasing deep out-of-the-money calls. Two playbooks, vastly different risks.
1.8 million contracts on day one — what does that tell us?
SpaceX listed last Friday at a market cap near $2.5 trillion, raising close to $86 billion (including the over-allotment option) — the largest IPO in history.
Options opened Tuesday and immediately set a record: nearly 1.8 million contracts changed hands on the first day.
This means → the market is deeply split on direction; both bulls and bears rushed to stake positions, and the options pit became the frontline.
What did retail buy — and why is the analyst bearish on it?
A standout block: one trader bought 7,000 July calls struck at $325, paying roughly $7 per contract — about $490,000 in total.
In plain terms = the trade needs SPCX to rally more than 50% from its roughly $201 close within about a month just to break even.
Options analyst Michael Khouw is explicitly bearish on the trade: implied volatility — the market's forecast of how wildly a stock will swing — runs abnormally high right after an IPO, and deep out-of-the-money calls (strikes far above the current price) face punishing time decay.
This means → treating a $2.5 trillion mega-cap like a low-float meme stock is high-risk speculation; every passing day accelerates the evaporation of option value.
How does the institutional "zero-cost collar" work?
An institutional investor executed 7,500 September 205/225 collars — a collar is an options structure that buys downside insurance and sells away upside above a cap — purchasing $205 puts while simultaneously selling $225 calls.
The structure was put on for a net credit of $2 per contract — the institution paid nothing for protection and actually pocketed a small premium.
In plain terms = the institution traded away gains above $225 in exchange for protection below $205, and instead of paying for that insurance, it got paid.
Where exactly are the floor and ceiling of this hedge?
Downside floor: if SPCX falls below $205, the effective loss stops at $207 (the put strike plus the premium collected).
Upside cap: profit tops out at $227, still more than 10% above the stock price at the time.
This reflects a clear institutional priority — not chasing further upside, but banking enormous post-IPO gains while keeping some room to participate if the stock keeps climbing.
What about investors who don't own shares yet?
Michael Khouw suggests an alternative: sell August $135 out-of-the-money puts (struck far below the current price), collecting roughly $8.10 per contract in premium.
$135 equals SPCX's IPO offer price — if the stock stays above that level at expiry, the puts expire worthless and the seller keeps all the premium.
If the stock drops sharply and the puts are assigned, the effective cost basis is $126.90 — a ~33% discount to the market price at the time, below the IPO price, providing a thick margin of safety.
Over roughly two months, the trade yields an immediate risk-return of about 6%, annualizing to roughly 36%.
How long will the high-volatility window last?
Michael Khouw cautions that elevated implied volatility after an IPO is the norm, and this premium will fade over time.
This means → whether it is the zero-cost collar or the put sale, both strategies harvest a "volatility dividend" — and that dividend has an expiration date; the earlier you act, the more room you capture.
In plain terms = high implied volatility is like a grand-opening discount; once it fades, the same protection or income structure costs more and pays less.
Content is for reference only, not financial advice.