SPCE: The options market is still paying a massive premium for upside.

There was a lot of focus on the stock losing 40% in a single session. Currently, there is massive speculation going on on the stock. I think the more interesting story is what's happening in the options market. Current setup: * Stock price: \~$4.46 * DTE: 15 days * ATM straddle: \~$1.80 * Implied move: ±40% (in 15 days!) At first glance, that's already a huge amount of uncertainty. But what makes it even more interesting is the skew. * 25 Delta Call IV: 382.7% - 11C * 25 Delta Put IV: 218.7% - 4P In other words, traders are willing to pay dramatically more for upside exposure than downside protection. Normally, after a move like this, you'd expect investors to scramble for downside protection. Instead, the market is still aggressively bidding for upside calls. # What the distributions show This first chart uses a standard lognormal framework. Keep in mind, this is a simplified model, we are not taking every single strike and its respective IV into account. https://preview.redd.it/6dmt0j3cl35h1.png?width=1174&format=png&auto=webp&s=658e0bd857a79bd1128c4a88f990fdc238c7e83f However, wou can still clearly see the market is pricing an extremely wide range of outcomes over the next 15 days. The second chart incorporates the actual options skew (only the 25 delta IVs, so again a simplified model). . https://preview.redd.it/atchogdul35h1.png?width=1166&format=png&auto=webp&s=9259e7ae9d0319885cde6dce530bb1cc7c35dc77 This is where things get interesting. Because call IV is significantly higher than put IV, the distribution shifts noticeably to the upside. This clearly isn't a balanced set of outcomes. The market remains obsessed with upside convexity. # Why? We all know this one already. SpaceX. There has been increasing speculation around a future SpaceX IPO, and many retail traders appear to be treating SPCE as a proxy vehicle for anything related to commercial space and apparantly a core part of the thesis is that $SPCE will be the most common error for people actually looking to buy $SPCX Whether that logic is correct is a completely different discussion. The options market doesn't care if the narrative is rational, it only cares that people are willing to pay for it. $SPCE is an interesting case study. I will probably stay on the side for this one, but curious to hear if anyone is trading this currently.