Latest / The Day Trading Podcast with Fexingo: Active Trading, Charts, and Short-Term Market Strategy / How Day Traders Are Playing the SpaceX Retail Allocation Cut
Transcript
- Lucas: SpaceX is raising seventy-five billion dollars in its IPO. That's the headline. But for day traders, the real story this morning is the retail allocation getting cut to the low twenty percent range. That news broke yesterday afternoon, and we're seeing the ripple effects in related names right now. Luna: And the S&P five hundred is basically flat today, sitting around seven thousand three hundred ninety-four. So it's not a macro-driven move — this is stock-specific, which is exactly the kind of environment we like to trade. Lucas: Exactly. The Russell two thousand is actually up over three percent in the last five days, so there's some rotational energy, but the SpaceX story is dominating the conversation. Let's talk about what the allocation cut actually means for an intraday trader. Luna: Because if you're trying to get shares in the IPO itself, you're probably not getting them. The retail pool was already small, and now it's even smaller. Lucas: Right. So the first-order effect is that anyone who wanted a direct allocation is now competing for even fewer shares. That pushes demand into the aftermarket — which means higher volatility on day one. But we're not there yet. The IPO hasn't priced. So what do we trade today? Luna: The spillover trades. Rocket Lab, for example. That stock was moving premarket this morning on the news. Adobe and AMD also made moves, but the space-adjacent names are the ones with the clearest catalyst. Lucas: Rocket Lab, ticker R-K-L-B, is up around four percent in the premarket. The logic is straightforward — any tide that lifts SpaceX should lift the whole commercial space sector, at least in the short term. But the smarter play might be the ARK Space ETF, ticker A-R-K-X. Luna: Because it gives you diversified exposure without single-stock risk. And if the SpaceX IPO gets delayed or the allocation news scares off some momentum, you're not caught holding the bag on a single name. Lucas: Exactly. And the ETF also has options, so you can structure a trade with defined risk. I'm watching the VWAP bands on ARKX this morning. The stock opened near the upper band and has been oscillating around it. If it holds above the VWAP on a pullback, that's a long entry. Luna: What about the VIX? It's at nineteen point one three, up a little over one percent in the last five days. That's not screaming fear, but it's elevated enough that a gap in either direction on SpaceX's debut could spike it. Lucas: And the VVIX is actually down slightly, at one hundred point six three. That's interesting. Volatility of volatility is contracting even as vol itself is a bit elevated. That tells me the market isn't pricing in a tail risk event — it's treating the SpaceX IPO as a known unknown. Luna: Which means the VIX could be a hedge if you're long the space names. A cheap put on the VIX, or a short VIX futures position, might be a way to finance a long call on ARKX. Lucas: That's a trade I've seen some experienced scalpers put on this morning. The premium on VIX options is a bit rich, but the VVIX being low means the vol of vol premium is cheap. So you can structure a diagonal spread that benefits from a slow grind higher in the space sector without overpaying for tail risk. Luna: Let's talk about the actual IPO mechanics. Seventy-five billion dollars is massive. That would make SpaceX one of the largest IPOs in history. And prediction markets are saying it could close above a two-trillion-dollar market cap on its debut. Lucas: That's a staggering number. Two trillion would put it in the same league as Apple and Microsoft. But the retail allocation cut suggests the underwriters are worried about volatility. They want the float in steady hands, not in accounts that will flip the stock in the first hour. Luna: And that's exactly the tension day traders can exploit. If the institutions are going to hold, the float is going to be tight. That means any retail buying that does get through — or any short covering — could cause explosive moves. Lucas: The playbook for a high-profile IPO with a tight retail float is to watch the first thirty minutes of trading. If the stock gaps up and holds above the offer price, you want to be long on the first pullback to the VWAP. If it breaks below offer, you stay away — because the institutional holders might start dumping. Luna: I'd add a level to that. Watch the volume-weighted average price, but also watch the bid-ask spread. In a name this hot, the spread could be wide in the first few minutes. You don't want to get caught buying at the offer and seeing the bid disappear. Lucas: That's a great point. Use limit orders, not market orders. And if you're trading the ETF instead of the stock, the spread is usually tighter because the ETF market makers are arbitraging the underlying components. Luna: So the actionable takeaway today is: the SpaceX retail allocation cut is creating an opportunity in space-adjacent names and ETFs. Use VWAP bands on ARKX, hedge with a VIX spread if it fits your risk profile, and wait for the IPO itself to trade with discipline. Lucas: One more thing — the Russell two thousand is up over three percent in the last five days. That's a big move for the small-cap index. If the SpaceX IPO is seen as a signal that the economy is healthy enough to support mega-cap space companies, that could spill over into the broader small-cap rally. Day traders should keep an eye on the IWM, the Russell two thousand ETF, as a potential momentum play. Luna: I want to come back to something you said earlier about the VVIX. You mentioned it's contracting even as the VIX is elevated. That's a signal that the market is complacent about future volatility. If that changes — if SpaceX has a volatile debut — we could see a spike in the VVIX that creates opportunities for those who are positioned for it. Lucas: Absolutely. And we're seeing that kind of setup in other names too. The broader market is waiting for the next catalyst. Today, that catalyst is SpaceX. Next week, it could be something else. The key is to stay flexible. Luna: If today's breakdown was helpful for your trading, that's exactly the kind of thing that keeps this show ad-free. Listener support at buy me a coffee dot com slash fexingo is what makes these conversations possible. It's a simple way to say this was useful, and it means we can keep doing deep dives without commercial breaks. Lucas: Yeah, we really appreciate it. It keeps the focus on the trades and the data, not on sponsors. So if you got something out of this episode, that's the link. And we'll get back to the charts now. Lucas: Let's pull up a specific chart. I'm looking at ARKX on the five-minute time frame. The VWAP is around twenty-seven dollars and change. Price is currently at twenty-seven twenty, so slightly above. The RSI is around sixty, not overbought. There's room to run if the broader market stays supportive. Luna: And volume is above the twenty-day average for this time of day. That tells me there's genuine interest, not just noise. If we see a dip to the VWAP with declining volume, that's a high-probability entry for a scalp toward the day's high. Lucas: Exactly. And the day's high so far is twenty-seven thirty-five. If we break that with volume, the next level is the prior day's high around twenty-seven seventy. That's a clean two-to-one risk-reward if you enter near VWAP with a stop below the session's low. Luna: What about the Russell? IWM is at two hundred twenty-one, up about three percent on the week. If that momentum continues, it could pull the space names higher even if SpaceX has a quiet debut. Lucas: There's a correlation there, but it's not perfect. The space sector has its own narrative. I'd rather trade the direct catalyst than rely on a sympathy move from small caps. But it's worth monitoring as a tailwind. Luna: Fair. So for the rest of the session, I'm watching ARKX for a VWAP hold, and I'll keep an eye on the VIX for any sudden spikes. If the VIX breaks above twenty, I might hedge some of my long exposure. Lucas: Good plan. And remember, the SpaceX IPO hasn't happened yet. The allocation news is just the appetizer. The main course comes when the stock actually starts trading. That's when we'll see the real fireworks. Luna: And we'll be here to break it down. That's all for today's episode. Thanks for listening.