Latest / The Day Trading Podcast with Fexingo: Active Trading, Charts, and Short-Term Market Strategy / How SpaceX Day Traders Played the Retail Allocation Cut
Transcript
- Lucas: SpaceX finally listed on the Nasdaq this morning, and if you were trying to get shares through your brokerage, you probably noticed something pretty quickly — the retail allocation was cut to roughly 20 percent. Luna: I saw that headline from CNBC around 8:30. It said the low 20 percent range. That's a lot less than some of the big tech IPOs we've seen recently. Lucas: Exactly. For context, when Reddit went public back in 2024, retail got about 25 percent. So this is tighter than that. And the IPO was heavily oversubscribed — prediction markets had been pricing SpaceX above a two trillion dollar market cap before the open. Luna: Right, and the VIX was sitting at 19.57 as of this afternoon, down about 9 percent over the past week. So overall market volatility is actually pretty calm right now. Lucas: That's the key setup. Low VIX, a highly anticipated IPO with limited retail supply — that creates a very specific technical environment for day traders. The opening pop was almost a given, but the real question was how the first hour would play out. Luna: So how did you see traders playing it this morning? I was watching the tape and it looked like the stock gapped up, then sold off pretty sharply in the first 20 minutes. Lucas: That's exactly what happened. The stock opened around 15 percent above the IPO price of $85 — so around $97–98. Then in the first 15 minutes, it dropped to about $90. That shakeout was partly because the retail allocation was so low — there weren't as many small buyers holding at the open, so the institutional flipping was more visible. Luna: So the low retail allocation actually made the price discovery faster and maybe cleaner for traders who knew what to look for. Lucas: Exactly. One play I saw a few experienced day traders use was shorting a volatility ETF that tracks the IPO market — something like the Renaissance IPO ETF — into the open, then covering when the VIX futures dropped. That ETF was up almost 8 percent premarket, then gave back half of that in the first hour. Luna: You're talking about $IPO, ticker i p o. That makes sense — it holds a basket of recent IPOs, so SpaceX's addition would boost it temporarily. But the rebalancing effect fades fast. Lucas: Right. And the Russell 2000 was up 3.1 percent over the past five days — small caps have been rallying. That gave some traders the confidence to stay long small-cap exposure while taking the other side of the SpaceX frenzy. Luna: So there was a bit of a rotation trade: sell the SpaceX pop, use the proceeds to add to small-cap positions that were already trending. Lucas: Yeah. And I think that's the smarter framework for today — don't chase the IPO headline. Instead, look at the market structure: low VIX, Russell strength, limited retail supply for SpaceX. That combination is rare. We haven't seen an IPO this size with such a low retail allocation since maybe Arm Holdings back in 2023. Luna: Arm's retail allocation was around 10 percent, and that IPO also had a big first-day pop followed by a drift lower over the next week. So there is precedent. Lucas: And speaking of precedents — this is actually a good moment to mention something we've been thinking about. We deliberately don't run ads on this show. It's a deliberate choice because we want to talk about whatever data and trades make sense, without any sponsor influence. Luna: Exactly. So if you find these conversations useful and want to support that ad-free approach, there's a simple way. It's buy me a coffee dot com slash fexingo. No pressure, just a way to keep it going. Lucas: And that support really does let us keep digging into niche stuff like today's IPO mechanics. So, back to those mechanics — let's talk about the actual ticker for SpaceX. It's S-S-P-X, which trades on the Nasdaq. Luna: I remember some traders were confused because they expected s p a c e or something more obvious. But S-S-P-X is what we've got. Lucas: Right. And the option chain opened pretty quickly. By 10:30, there were active strikes from $80 to $120. The implied volatility on the weekly options was astronomical — like 120 percent IV. That's a double-edged sword for day traders. Luna: High IV means expensive premiums, so you have to be very precise with direction and timing. A lot of people lost money buying out-of-the-money calls this morning. Lucas: Exactly. The smarter play was selling premium — like a short put credit spread at the $85 strike, which was the IPO price. If you sold that around the open when IV was peaking, you collected a huge premium, and by midday the stock was still above $90, so those puts expired worthless. Luna: That's a classic volatility crush trade. And it worked because the stock never seriously threatened the IPO price after the first 30 minutes. Lucas: Right. And the broader market backdrop helped. The VIX at 19.57 suggests no panic, so there was no systemic reason for a sharp reversal. The Russell's strength also supported the idea that risk appetite was healthy. Luna: So the day trader playbook for a high-profile IPO with a low retail allocation seems to be: fade the opening pop, sell premium, and watch for the VIX term structure to flatten. Lucas: Yeah, and the VIX term structure actually did flatten a bit today. The front-month VIX futures were around 19.5, but the second month was at 20.1 — that contango narrowed by about 0.4 points since yesterday. That usually signals that traders are less worried about a near-term spike. Luna: So if you're a day trader, that contango narrowing is a tailwind for short-volatility strategies. It reinforces the idea that the IPO didn't create systemic stress. Lucas: Exactly. And one more thing — the prediction markets had been pricing SpaceX above a two trillion market cap. That's a massive figure. For context, that would make it one of the top five companies by market cap. So the IPO price of $85 already reflected enormous expectations. Luna: Right, so the upside was already somewhat priced in. That's another reason why the opening pop was limited to about 15 percent before the fade. Lucas: Exactly. The day trader lesson from today: pay attention to allocation data, watch the VIX and small-cap indices for broader risk appetite, and don't assume an IPO will keep ripping just because it's a big name. The structural details matter more than the hype. Luna: Well said. And we'll be watching how SpaceX trades over the next few days. The first week is usually the most volatile. Lucas: Absolutely. We'll come back to it if anything interesting happens. For now, happy trading, and we'll talk to you next time. Luna: Take care, everyone.