Flows into some SpaceX leveraged exchange-traded fund products — which offer amplified exposure to the daily performance of stocks — also suggest retail bulls are cautious.
Total assets in all seven leveraged long single-stock SpaceX ETFs now stand at $401.1 million as many investors bet its shares will rise.
However, investors betting on shares dropping are also in the game, with $296.8 million having flowed into the 2x inverse/short funds, according to data from VettaFi. That gap between bears and bulls is far narrower than is typical for stocks with leveraged ETFs.
Short sellers circle
Short sellers, who bet against shares by borrowing and then selling them into the market, smell blood. Short interest remains near a record high, with roughly 63% of SpaceX's free float on loan, according to Peter Hillerberg, co-founder of data and analytics company Ortex Technologies. There is almost no stock left to borrow, he said.
Some SpaceX investors have had difficulty hedging, as the heightened expectation for volatility has made options more expensive.
"We were going to set up a synthetic hedge for our investors to hedge their SpaceX exposure, but the cost was so high that no one was interested," said Clint Sorenson, CEO and chief investment officer of Ascentis Asset Management.
Shorts are sitting on an estimated $18.4 billion of mark-to-market gains based on SpaceX's July 31 closing price of $108.37, Hillerberg estimates.
Mark Spiegel, managing member and portfolio manager at Stanphyl Capital Partners, warned that the bearish positioning was crowded.
"In recent weeks, the SpaceX short interest increased so substantially that I think much (if not all) of this Thursday's 'initial' unlock was priced in by today's low," Spiegel said in an emailed note.
Indeed, some options traders appeared to be girding for a rebound in the shares, with contracts struck above the current share price also showing healthy demand, which traders suggested could represent ongoing faith in Musk's success.
"Clearly there are plenty of traders willing to speculate on a return to the $135 IPO price, if not well beyond that," said Steve Sosnick, chief strategist at Interactive Brokers.
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