SpaceX Volatility Collapses as Musk Targets $3.5 Trillion Revenue by 2033
TREE NEWS reports: In a striking shift for one of the most closely watched names in the market, SpaceX shares have seen their implied volatility plunge from over 120 before earnings to just 57, according to ThinkOrSwim data. The stock, which would have been the most volatile component of the S&P 500 at its IPO, now wouldn’t even crack the top 25. This newfound calm comes as CEO Elon Musk made headlines Thursday by projecting that SpaceX’s annual revenue could reach $3.5 trillion by 2033—seven years earlier than Morgan Stanley’s prior forecast of 2040.
Musk’s latest comments, made Thursday, follow an earlier prediction this month that revenue would surpass $1 trillion by 2030, a year ahead of pre-IPO estimates. The stock closed up 0.89% on Thursday, with a modest late-day bump following Musk’s remarks.
What Happened
The volatility compression is a dramatic reversal from the stock’s early days, when it was among the most volatile large-cap names. Several factors are at play: insiders and early investors have chosen to hold their shares after the first lock-up period expired, and SpaceX’s inclusion in the Nasdaq-100 and Russell 1000 indices has brought in passive index fund buying that smooths price swings.
Options market data shows a nuanced picture. Put/call open interest stands at 1.1, slightly below Monday’s record high of 1.2, but Thursday’s volume skewed heavily toward calls—335,000 call contracts traded versus 175,000 puts, with active buying of 168,000 calls versus just 75,000 puts. The top seven most active contracts by volume were all calls, led by the 144-strike expiring Friday, which requires a further 3.5% gain to profit.
Market Impact
For investors, the reduced volatility is a double-edged sword. On one hand, it signals a maturation of the stock’s trading profile, potentially attracting institutional investors who were previously deterred by extreme swings. On the other, analysts caution that lower implied volatility doesn’t necessarily mean cheap options—SpaceX’s implied volatility still exceeds its realized volatility, meaning the premium is not as low as it appears.
Noel Smith, founder of Convex Asset Management, who accurately predicted the volatility drop in June, likened the shift to a ‘wild man raised by wolves in the forest’ integrating into city life—’SpaceX has now moved into the city.’ He notes that while the stock is at its cheapest relative to its own history, he would still sell volatility at levels of 54 or 55.
Key Takeaways for Investors
- Volatility normalization: SpaceX’s volatility profile has fundamentally changed, making it more comparable to a typical large-cap tech stock than a speculative IPO.
- Options pricing: Don’t mistake lower implied volatility for cheap options—realized volatility is still below implied, so premiums remain elevated on a relative basis.
- Revenue trajectory: Musk’s aggressive revenue targets, if even partially met, would make SpaceX one of the largest companies in history, but such projections carry high uncertainty.
- Index inclusion effects: Passive fund flows from index inclusion are likely to continue supporting the stock and dampening volatility.
- Watch for catalysts: Upcoming earnings and any news on Starship or Starlink could reignite volatility, so traders should stay nimble.
