SpaceX passed a key test Thursday. Sophisticated traders bet the bottom is in
Sophisticated traders are shifting their options market strategy for SpaceX, moving from call-buying to put-selling and risk-reversal trades. These moves suggest that institutional investors believe the stock may have reached a bottom.
Why it matters
Changes in options market behavior often signal shifts in institutional sentiment regarding a company's long-term valuation.
SpaceX believers are trying a new approach in the options market.
Up until now, options flows were largely dominated by out-of-the-money call-buying, but the most popular directional trade on Thursday – albeit by a small margin – was selling puts. Of the $600 million in premium traded by midday, $316 million was in puts, with $166 million likely tied to sales of puts, SpotGamma data show. It's a bullish view, but more about the stock stabilizing rather than staging a huge rally.
SpaceX shares in the past five trading days For the most part, volumes were split between puts and calls Thursday, but two of the biggest dollar-amount trades of the day were bullish combination trades that involved multimillion-dollar put sales alongside long call purchases – a structure known as a risk reversal that offers two points of bullish exposure: short a put and long a call.
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