Options on SpaceX began trading this week shortly after the company's initial public offering, but a strategist warned that the strike prices reflect "expensive" and "dangerous" bets. CNBC's Jim Cramer argued that investors are buying into Elon Musk's vision rather than the firm's current earnings power, suggesting a speculative fervor.
Michael Burry, the investor known for betting against the housing market, said he was tempted to short SpaceX but ultimately passed because the options were too costly. He contended that the company's market capitalization has climbed to levels that tower over many established enterprises and fortunes, raising questions about its valuation.
The debut of options trading introduces a new layer of complexity for retail and institutional participants alike. Wide variation in strike prices indicates deep disagreement about the space exploration firm's trajectory.
For investors, the risk lies in overpaying for upside that may never materialize. As Burry's reluctance highlights, the cost of bearish protection may outweigh potential rewards. The coming weeks will test whether the options market finds equilibrium or amplifies existing volatility.
Cramer's take reinforces that sentiment: SpaceX's appeal rests heavily on Musk's track record, not quarterly results. That dynamic could leave option holders exposed if market sentiment shifts.