Retail and Wall Street are underwater on SpaceX — but not going down without a fight

Good times for SpaceX are proving short-lived as Elon Musk’s intergalactic IPO is now giving fodder to bears who said the U.S. stock market wasn’t ready for a $2 trillion market-cap injection.

Shares of the satellite and exploration business dropped 5.5% on Friday, extending a 10-day decline and hitting a low of $122.12 — roughly 9% below its IPO price of $135. The stock’s now down 44% from its intraday high of $225.64. The Nasdaq-100, which was less than a percent off its record at SpaceX’s high, is now down 6% from that peak.

Retail bulls who piled into call contracts of all kinds on SpaceX are either underwater or run over — a position not too much unlike the Wall Street underwriters like Morgan Stanley and Goldman Sachs, who elected to raise an additional $11 billion in SpaceX equity after its strong start.

“People always feel like they miss out on these IPOs – look at the positive side of it, now you can go in there and get as much SpaceX as you want,” said Don Kaufman, co-founder of TheoTrade and a former director at retail brokerage TD Ameritrade. “I’m also surprised the banks that led this aren’t selling off more.”

SpaceX traded just over 500,000 options contracts by late morning Friday, the 11th-heaviest traded ticker in the market, certainly respectable but surpassed by Micron, VIX, small-cap ETF (IWM) and AAPL trading, a notable drop-off for the now-$1.6 trillion market cap giant.

Of the $350 million in SpaceX options premium traded Friday, $290 million was tied to puts, and seven of the top 10 contracts traded by volume were puts, according to data from SpotGamma.

However — a closer look shows believers of Musk’s mission aren’t giving up without a fight. Over half of the total put premiums were sold, and among the top 10 trades by volume, nine were bullish, according to SpotGamma and Cboe LiveVol data.

One big trade on the tape reflected a bearish but measured tone: the trader bought $2.6 million worth of the 140-strike puts expiring today but sold the same number of 135 strikes against it, lowering the cost of the trade by $1.6 million.

“I’ve been selling way out-of-the-money puts,” added Kaufman. “I’ll buy it all day long at $100. Valuation will still be well over a trillion but it is what it is – a monster and will continue to be a monster.”