SpaceX IPO Will Drain Markets

Added: 2026-05-28

[00:00:00]Hello folks, Brandon Chapman with you.

[00:00:02]It's a Theo trade video for uh Wednesday and uh boy, you know, Don Coffman's normally the uh presenter for today, but uh Brandon Chapman is substituting as we have a shortened week this week on May 27th. Well, as we kind of think about the market going forward here, the S&P is basically flat on the session. We've been bouncing around levels intraday as we, you know, kind of break this down and you had some pretty significant points. In fact, let me just bring up SPY here. But uh we had some pretty specific points playing out right now.

[00:00:33]And the top side we have the kind of significant kind of pinning level about 750. And as we approach 752, you see the the positive gamma structure really taking hold. Uh but below 750, we start to see more of a negative gamma structure potentially create downside volatility. And we had a couple of moments today where it looked like we might be able to get there. And I was really looking for this to break through the opening range and retest and bounce down. I I took a little bit of a a speculative trade. We might when we might wilt into the close and into that post 15 minutes after the uh the cash uh the cash closed here today. We may not get it. Um but uh point being is that today the market remained bottled up right between levels. We saw any attempt to rally was met with resistance as you know positive gamma structure leads to selling rallies and buying dips and we never saw the downside really expand and as a result it left the market pretty unsatisfying today. You know as we look at kind of where we finished or we're looking to finish now with about 15 minutes to close. We really don't have any possibility really very little possibility we're going to see any big movement to the upside or the downside. And so while price action is not is pretty unsatisfying, the reality is there's a lot of stuff going on behind the scenes in the option market today. It was a very active day particularly if you are hedging downside risk and why I mean what's coming up here that might create some degree of volatility in the market. you know, Don Kaufman this morning, um, owner, uh, one of the one of the owners of Theo Trade, uh, he has a session first hour of the morning just after the open and he talked about the SpaceX IPO. Now, he's someone that worked for, you know, was one of the one of the first employees at Thinker Swim and worked at TDI, trade, head over education. He had a chance to participate in a Google IPO, right? So, this is someone who has some experience in this regard. And again, I can't look at the symbol because there isn't any yet. Now, SpaceX is projected to IPO, have a listing date on June 12th, and uh June 11th when the final price is set.

[00:02:43]They're looking to raise $2 trillion.

[00:02:46]Now, put that in perspective. Nvidia is a what was a $5 trillion company at its peak up here. So, the realities of this is a very significant point. And maybe, you know, Elon Musk can maybe they're going to merge Tesla and SpaceX together and be a singular company. Now, what does this mean for the market? Unlike other scenarios, like for example, Nvidia, um, you might sell another stock and buy Nvidia. But the reality is the amount of money in the market doesn't necessarily change. It just took it just took somebody selling at the bid on one and buying at the ask on the other or closer to the bid on the other. and we'll see one weaken and one strengthen.

[00:03:28]We're certainly seeing that today, for example, as utilities were down. We're kind of rotating today at utilities and we're rotating into Staples. It doesn't necessarily mean that new money's coming in. It's just a matter of we might be marginally more willing to sell utilities today versus more marginally more willing to buy XLY or cyclicals.

[00:03:48]And as a function, you see cyclicals go higher and staples, sorry, utilities go lower. And that's just that's just the machinations of the market, right? Price goes up based upon who is more willing to buy or sell now. Dom made a great comment this morning is that anyone big involved in SpaceX has been involved for a long time and right now they're opening it up according to AI potentially 30% of the offerings going to retail investors. What does that really show? I mean, is SpaceX really about a new burgeoning investment opportunity, or is it just cash out for those that have connected who have been invested in SpaceX for a while and now they're looking to potentially get their money back or money out of SpaceX at this point? Now, it doesn't mean that SpaceX can't create value for investors on an ongoing basis, but the question becomes, is the valuation real? Because now all of a sudden we have to what this is requiring in order to create this IPO it's requiring about $2 trillion of money that's unfettered right this money has to come out of savings has to come out of other areas and yes some people may decide to sell at market stuff like Nvidia while it doesn't create new money it does create lower prices right as they're more potentially more willing to sell at market on Nvidia to buy SpaceX.

[00:05:11]sex and then all of a sudden you see the the depreciation in the price just because people are more marginally willing to sell and there's fewer buyers out there. The reality is at this point in time to siphon off about 2 trillion maybe 1 and 3/4 trillion dollars for a SpaceX IPO is rather significant as right now retail investors are trading at heavy heavy margin debt levels record high in terms of the amount of debt the retail traders are taking to buy stock right now. savings rate ah I'm not sure a lot of debt yes so the reality is most of the markets rallies we've seen yes it's been driven by retail and the effect it has by by for example option dealers have you know basically covering their hedges helping to create lift in the price of the stock but this might be a point right now where the market could be at a pretty big transition and we look at the advance just from low to high off the low down here for example oops to a potential high right here. We're talking about a 20% advance in about 41 days, right? 58 calendar days, 41 trading days. So essentially 2 months of trading and we're up 20%. It's pretty phenomenal.

[00:06:26]And as we look at the potential for a SpaceX IPO requiring about $2 trillion of unfettered cash to go in to support that IPO, where's it going to come from?

[00:06:37]increased leverage on the part of retail. I think the inclusion of retail, which is fairly unusual at this point in the IPO, the reality becomes that they may need that to get the valuation they want, right? A valuation between 1.75 and $2 trillion. So, don't necessarily look at the SpaceX saying, "Hey, this is the beginning of a massive rally in the market." This might be the beginning of the end, right? As a result, it's requiring a lot and sucking a lot of value out of the market to be able to sustain that type of IPO. And guess what? We've got chat GPT around the around the corner as well. So we have a lot of demands on investors right now where those that have invested in these projects for a while may be looking to cash out and they be and at least for the case of SpaceX they may be opening it up to retail trades retail traders just to try to be able to capture that valuation and let these long-standing investors and these companies potentially cash out to some degree over the coming year or more trying to secure that higher valuation today. So with that backdrop, I mean, how are people kind of addressing that? I mean, the S&P is not moving today. We are stuck. And again, we go back here to like a one day, one minute uh sorry, one day, five minute chart. I mean, we are just bouncing around these key kind of gamma levels today. Not breaking out to the upside, not breaking to the downside.

[00:08:04]7500's the level in here. And so, as a result, not a lot's happening. But that's not necessarily everything, right? There is another market to this.

[00:08:14]And again, we're talking about in this case, we're talking about the options market. And there is some rather significant trade that did occur in the options market today. You know, here's AAL. I mean, those are some significant 82,000 contracts bought in AL. I mean, are we about to see oil prices surge?

[00:08:35]Are we about to see an escalation? Well, look, they traded 15,000 contracts in one trade. 27,000 contracts for the day.

[00:08:43]And Devon I mean, if we actually see oil prices rise, we could be in a pretty significant trouble here, right? If if we start to see that that come in. Uh I had a I had a trade on JetBlue looking for a squeeze. I closed that out today towards the high just worried about the potential that oil prices while we're sitting at lows down today did not create much lift to the S&P were flat on the session despite the fact oil prices declined 4% today. Look, I know the promise. I know the idea that somehow, right, oil price is going to come down sharply if we ain't deal maybe, but I'm not sure necessarily gas prices are. I mean, we're shipping off a lot of distates. We're net importers of oil, but all these different products that oil produces.

[00:09:32]We're we're we're net exporters of those products. Yes, we're dipping into the SPR maybe to pro provide for that gap in the supply, but the fact of the matter is oil markets are tight. And if you look at the product depth here on Thinker Swim, we type in forward/CL and you look at the futurist prices, we're in pretty dang steep backwardation right now. We are pricing in what a shortage in oil and it's not going away. The upside risks remain and any positives were kind of hanging. and we're dropped down to this 85 level and then we jump quickly back up to 105110.

[00:10:06]Is the options market potentially signaling that possibility? Well, certainly if you look at 88 82,000 puts bought. And if I click on location right here, you'll see the actual print. Uh let's go 100 plus, you'll see they bought 82,000 contracts for a buck 10. I mean, that's an $8 million trade. Is it a hedge? Possibly. It's about a 30 delta. But again, what are they hedging?

[00:10:31]Downside risk. And this creates a life of it own life of its own. It's a target price in terms of 14 on American Airlines, but also it's a matter of dam below 14 does create additional downside pressure. So the big swing we've got here, great. Yeah, we've gotten that kind of, you know, if you were long these stocks, it's been a patient process. You know, we originally went long in Block Hunter back here off the lows and closed it. took another position in JetBlue, closed that both profitably, but the idea being is we may be running its course and today's option activity does show or look like some downside potential, maybe some upside in oil. And the great thing about Devon right now is that look and when you bring up DVN, we had a pretty large gap here in the price back here. We ran, we fell back again, we're back at the same level of support. And when you start to look at the gamma exposure, what you'll find is that a lot of that exposure is at much much higher prices. For example, $50. So the point is that we got some buying in here, the 4750s, the 50s. We got some maybe closing out here 55s. But the point being is that we really don't have a lot of resistance in terms of positive gamma unless we really start to run back towards 50. I think the door is open here for a nice run of over 10% if oil prices rebound and help create that bullish bias. Well, what else we got going on here? Right, look at EM 17,000 contracts. We just click right there.

[00:12:05]Again, we'll filter this out and focus.

[00:12:07]There's no other tool like this that allows you to really drill in and find the activity this fast. Nothing. 17,000 contracts bought at the ask for $2.

[00:12:18]Again, it's a $ three and half million dollar trade right there. We're looking at what downside, right? 68 20,500.

[00:12:25]Again, what was that? It was bought in one print 20,000 contracts. These are institutional level trades stepping in in emerging markets in KRE. 25,000 contracts. Again, what are they doing on KRE? We'll type in K up here. And again, I'll kind of expand this out and we'll see the spread trade that was put on.

[00:12:46]They bought the 69, sold the 27. 25,000 contracts looking at downside in KRE.

[00:12:54]And that's not all for example, right?

[00:12:57]67 gets you right there on K. Again, that's a pretty reasonable downside move. And notice that banking in general, XLF finished down nearly 1% and finishing just barely off the lows. If we flip this around, look at XLF. Well, what kind of pressure is forming in XLF?

[00:13:14]Well, if we actually look at a couple of stocks today, I'm just going to reset my filters. And again, we'll look at JP Morgan. This would show up in my one-click block trade, but in this case, bought 3,500 contracts near the ask price. Those are 275 strikes for July 2nd. Now, these are much more diverse in terms of buys and sells. This is an actual singular block trade that institution is putting on for 3515 contracts. That's size. and it's playing the downside. What about Bank of America, right? Let's bring up BAC here.

[00:13:47]Now, there's a lot of trade in BAC, but notice the 50 and 52. Okay, these are the ones that really kind of stand out.

[00:13:55]Maybe the August, I didn't really dig into this one here, but those are two big ones. But all you have to do is look at this. If we consider Bank of America and we look at the downside potential or BAC, all you have to do is look at these statistics for today. And earlier we saw a very very lopsided and still flattened out a little bit here. But this earlier today was 25% at the bid and about 45% at the ask. Very very big differential.

[00:14:22]We still have a decent size differential right now. We're definitely more biased to the downside in Bank of America. What are we seeing right now? Trepidation of financials. Well, look folks, I mean, if we're expected to raise rates here possibly with the new Kevin Worsh coming in, new Fed chair, uncertainty, flattening yield curve, this is not good for banks. It's not good for retail uh regional banks as well that are more lending focus. Now, we do see some bullish trade here in CLF, for example.

[00:14:49]We see bullish trade in stocks like RXRX.

[00:14:53]Uh today, you see 5,000 contracts.

[00:14:55]They're buying the $4 strike price uh near the ask. And uh so again we see some buy side activity in RXRX oops RXRX and again across the board uh we're seeing we're seeing these being bought here. So again we're seeing a lot of pressure in RXRX. We are seeing a company that is at the moment uh kind of breaking out today and again almost closed near the high of the session. You probably faded just a little bit. We're back against this level. But again, a $400 $4.50 target uh in the coming weeks to month or two. That's some upside.

[00:15:32]Celsius holdings, again, the the institutions are showing we did back off the high a little bit today, but Celsius holdings right here, you'll see for the most part predominantly buying call options. CLF again, a big breakout today, predominantly buying calls today. So again, there's no other platform like this where it's this easy to identify the biggest option trades. Whether you're seeing just that continuity trade, just a lot of retail piling in or large block trades from the part of institutions stepping in big time at these levels against CLF today. So that kind of brings up the bulls and the bears for today. But again, the teners were seeing some big time put option activity come in at the market high, hedging downside risk in some key areas like financials for example. And we'll see whether it starts to spread across the periphery in semiconductors and others. And again, right now this is a point where you got to be a little cautious as we move forward in the next couple of weeks leading into that SpaceX IPO. Well folks, we'll catch you on the Monday video. Have a great one. Thank you.