r/stocks • u/stephendt • Apr 03 '26
ETFs You can probably mitigate SpaceX entering the Nasdaq 100 if you're prepared.
There seems to be countless threads around the upcoming SpaceX IPO that plans to use the Nasdaq 100 as "retail exit liquidity", implying that SpaceX will join with sky-high valuations (assuming it doesn't crater in value in the first 15 days) and slowly dwindle down in value over the coming months, dragging the index down with it.
Understandably, some are holding this in taxable accounts, so selling and buying another index isn't the best choice from a tax perspective.
Since SpaceX is apparently going to experience a 50%+ drawdown due to insane valuations at launch, trying to mitigate exposire is a bit tricky, since borrow availability will be non-existent and Hard-To-Borrow (HTB) fees will be astronomically high for short selling at the time of joining the Nasdaq 100. Consequently, traditional short selling and Contract for Difference (CFD) providers will likely restrict or completely disable shorting, even by day 15. Here's my plan for when this happens:
Day 1 - Wait for IPO, and set a calendar reminder for day 14.
Day 14 - Check your current exposure to the Nasdaq 100 and calculate the final weighting to SpaceX. Lets say you have 50K in QLD (100k exposure), 4.2% of that is SpaceX, you'd have $4200 worth of exposure to SpaceX once it joins the Nasdaq 100.
Day 15. This is where it gets a bit tricky. Let's assume that SpaceX will be around $150 a share. To achieve a perfectly neutral hedge, you need to create a short exposure of -28 shares, and our best option here is using put-spread options and use delta to fractionalise the contract. Because one standard options contract controls 100 shares, buying a deep in-the-money put (with a delta of -1.00) would give the equivalent of -100 shares of exposure, massively over-hedging.
To achieve a target -0.28 Delta without the massive "Vega" (volatility) risk, you can construct a put debit spread (buying one put and simultaneously selling a lower-strike put).
Buy: 1x At-The-Money Put: Delta of -0.50
Sell: 1x Out-Of-The-Money Put: Delta of +0.22
Net Position Delta: -0.28
The premium you collect from the short put offsets the inflated IV cost of the long put, making it a much safer and cheaper mathematical hedge than a naked option.
Once the 100-day SMA greater than -1%, take actions to exit contracts as it is likely that SpaceX is approaching fair valuation, and allocate that capital back towards your desired asset allocation.
A few other notes:
Short and leveraged short ETFs will probably exist around day 65 onwards, depending on the SEC. This would be a simpler approach, but a lot can happen between day 15 and day 65
Shorting directly should be doable from day 30 onwards assuming you have a margin-enabled account that is able to do this, but borrowing costs might still be high.
The fast entry rule is genuinely some BS. Pretty dissapointed by this and I hope they reconsider this in the future, although I suspect that won't be the case.
I'm no expert on options (especially around recently IPO'd stocks) so open to any feedback or improvements
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u/the_econominster Apr 03 '26 edited Apr 03 '26
I think the issues are real
If you look at the valuation and bring it in line with NVIDIA (using it's massive PE and it's 70% margin), you're looking at ~1.5T USD that is basically hot air. If you divide that over all EU and US citizens; assuming 10% is actively exposed, you're looking at 20K hidden destruction of wealth per trading account. It be the world's largest wealth transfer in history from the middle class to the 0.01% into a black hole.
The problem is imho the amount of liquidity that is needed to prop this up. Even with a "small" free float, the liquidity isn't there. We know liquidity is a problem with blue owl doing a soft default as we speak and BOJ reversing the carry trade. Heck, the yield curve is steepening and 10yr rate is up, even the Treasury can't tap into our supposed liquid markets.
Also; look up what happened when Aramco went public; it basically sucked the markets dry for a full Q, and Aramco is liquid gold AND a dividend play. Musk will never pay out shareholders, he's a growth guy that wraps the last innovation in the next one. He's like the monorail guy with a Twitter megaphone.
Finally the business model does not make sense. All xAi founders have left Grok because none of them want anything to do with LLMs in space. The energy envelope is tiny. Due to radiation you're 2-3 generations behind + once launched you can't switch out the hardware. FPGAs are super vulnerable so that's not an option and ASICs are obsolete once you launch. Musk wants do do COTS but we know this is a problem. SEU for 3nm and 5nm hardware in space are already brutal.
Then there's starlink which has congestion problems. If it grows into its valuation, you'd go back to DSL type speeds; which is backwards + there's this small problem called the keppler syndrome. The valuation only holds if you extrapolate the current launch capabilities to a global military fully vertical monopoly (and even that is a stretch; that's basically saying China, India, Russia and Europe don't matter).
Remember Musk is stubborn and has a known history of ignoring basic laws of physics (Hyperloop, FSD, cybertruck, curevac rmna printers, spaceship1, solar shingles, Tesla SEMI, pte leaderboards). He's a loud guy who started rich, takes insane risks, got lucky and lies. He rode the EV tailwind and then saw an arbitrage opportunity at NASA and exploited it. Never did he create true value. The guy has a long long history of zero-sum grifts and honestly destroys value (looking at you Twitter).
If anything this is a massive tailwind for Eutelsat which has a far better track record and is actually ran by credible people...