Hi Shoppers,

Wow what a day in options history!

SpaceX (SPCX) options officially began trading today and they made history trading 10,000 contracts a minute (as per Henry Schwartz at the CBOE).

They may have also made history as the fastest cratering implied volatility of option pricing… EVER!

Here at OP we talked about it at our daily meeting and we all agreed if we were market makers in SPCX we would begin the day with VERY expensive options as there will be buyers that did not get in on the stock and they will want it as this was the most hyped IPO in history.

And that is exactly what they did.

I took a snapshot of the calls right after the opening and the implied volatility for options expiring on Thursday went from 243 to 310 and higher for those way out of the money calls.

Calls expiring in July had an implied volatility range of 122 to 140+.

I took another snapshot an hour later:

The stock had rallied just under five bucks. As a general rule of thumb implied volatility goes down when a stock goes up but this was insane!

The calls expiring Thursday were down to 113-238 IV and the Julys were 108 to 126!

That my friends is called a premium crush. And we knew that was going to happen.

For example, take a look at the Jun18 210 call:

Stock trading $206.93 the calls were $15.00 – $15.80.

An hour later the stock was trading $211.75 and those same calls were $14.50 – $14.80.

Stock up $4.82 calls down a buck!

We will see more of it tomorrow.

The good thing is the market widths on these options is nice and narrow giving us plenty of trading opportunities.

Actually, join Mark Sebastian and me at 10:30 ET to discuss just how to trade these insane options.

You know we will have at least one trade idea for ya!

Thank You For Reading… See You Next Tuesday,

Licia Leslie