SpaceX Stock Turnover Was More Than 3.5x That of Nvidia. That’s a Wakeup Call for Investors and a Sign to Trade SPCX with Inverse and Leveraged ETFs.

We have transitioned directly from months of intense media anticipation ahead of the SpaceX (SPCX) IPO into a period of extreme price discovery. 

SpaceX established an entirely new benchmark for initial public offerings, raising roughly $75 billion in a single day. This event instantly solidified it as the largest IPO in financial history. The sheer volume of capital required to clear this transaction forced institutional desks to reallocate liquidity away from other sectors to accommodate the influx. Some have even blamed recent weakness in the Invesco QQQ Trust (QQQ) on traders needing to sell stocks to have cash to buy SPCX. 

The company bypassed traditional underwriting norms by allocating a record 20% of its total IPO shares directly to retail participants. The self-directed trading community responded immediately. On the day of the debut alone, retail net buying reached $117 million, marking the largest retail net accumulation for any stock market debut in history.

During its initial three trading sessions, intense buying pressure drove the share price to an intraday peak of $225.64. At that specific high-water mark, the company’s valuation expanded past the $2 trillion threshold, briefly eclipsing Microsoft (MSFT) to become the fourth most valuable publicly traded corporation in the United States — all while currently operating without net profitability. 

At one point, daily turnover in the rocket company’s equity was more than 3.5 times that of Nvidia (NVDA), which routinely leads the global market in liquidity allocation. For a brief window, SpaceX single-handedly monopolized the market’s attention span.

If the current decade has taught me anything as an investor, it’s that my late father’s first two rules for investing are the best pieces of advice to follow: 

1. You never know how high a stock will go.
2. You never know how low a stock will go.

Swap out “mania” for “stock” and you’ll see my point. Because SPCX is, by many accounts, half growth stock and half meme stock. The growth part is in the name. SpaceX is a space exploration company that serves as a perfect example of a wide-moat business. It has a huge first-mover advantage in satellites, rocketry, and more. However, its other half is a small collection of losing businesses.

So why the intense interest in this stock? Those volume figures, the “all-in” attitude from retail investors, which started well before the stock actually came to market? It is the investing world we now live in. One where what the masses see and hear in the mainstream media has as much influence on their actual investing decisions as any other fundamental, quantitative, or technical factor. 

And I like it

As skeptical as I am, the longer your history as an investor, the more you’ve learned about human behavior. So instead of being a curmudgeon that complains endlessly about volume records for new, highly imperfect public companies, I have taken a very different approach. I’m pouncing on this market climate like a tiger.

What does that mean? More trading, having a shorter time horizon, using a full toolset to include ETFs, stocks, and options. And putting even more emphasis on technical and emotional trends than ever before. All with a rock-solid underpinning of risk management.

In the case of SPCX, I’ve already moved on from some nicely profitable put and covered call option trades and have a smaller position in those. Beyond the stock itself, I’m embracing the inverse ETFs that I suspect will be a more sustainable way to profit from future declines in SPCX. Options are great until volatility spikes to a point where even selling calls against a position doesn’t make for very efficient trading.

And this approach doesn’t just apply to SpaceX. 

I am evolving my strategy in a similar way for much of my investing work. For instance, a market like this calls for understanding better how to profit from the short side, without using options. Thankfully, there are now over 100 ETFs that allow us to do that, essentially moving opposite a stock, industry, theme, sector, or major index. 

It all comes back to the same thing. That in the market we have, valuation metrics, earnings growth rates, and analyst estimates are not as helpful as they once were. The stock market is going through a fundamental revolution, driven by the explosion of liquidity, credit, investing products, and innovation, not to mention the remarkable lift in empowerment of DIY investors. They just need straightforward insights and opinions, based on experience and a thoughtful investing process, and not on “what am I selling.”

We all sensed that the SpaceX IPO would launch a new era, not just for technology, but also for how we invest. 

For those looking to try to profit from SPCX regardless of where it goes from here, the options market is now fully flush with contracts to choose from. There are SPCX-underlying leveraged ETFs. Among them, a long and short pair, Leverage Shares 2x Long SPCX Daily ETF (SPCH) and Leverage Shares 2x Short SPCX Daily ETF (SSPC) combined for more than $6.5 billion in volume during the stock’s first week of trading. That’s yet another indication that the volatility, and the trading opportunities, are just getting started.

Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob’s written research, check out ETFYourself.com.