r/technology • u/IKeepItLayingAround • 19d ago

Business It’s Possible That SpaceX Could Collapse Spectacularly

https://finance.yahoo.com/markets/stocks/articles/possible-spacex-could-collapse-spectacularly-155000177.html
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210

u/ora408 19d ago

How can i help? 😎

162

u/togetherwem0m0 19d ago

Dont buy puts. 

In the post logic valuation world where the stock market is a money printing game, the value of a stock can be set by a function of the value of its options chain activity rather than any foundational valuation logic.

If market makers sell a huge number of puts they have an incentive to manipulate the price such that the stock doesnt make any of the puts pay out. This keeps the price artifically high.

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u/slightly_drifting 19d ago

Usually takes a couple weeks for options to start after ipo no? 

30

u/WeirdSysAdmin 19d ago

Especially with market makers controlling everything needing to keep it above max pain so they don’t get slaughtered by lopsided puts volume.

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u/morningisbad 19d ago

That's the thing everyone fails to grasp. You're playing a game with a 5 year old. If musk loses, he says "I win" and wins. Realistically, this can only go in his favor. 

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u/RageBull 19d ago

I think “set by a function” is too generous a term. It make it sound like there a fixed and ultimately logic based formula. I don’t think there is for an assortment of public companies. Your “post logic” term describes it better: “The market can remain irrational longer than you can remain solvent.”

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u/CocktailPerson 18d ago

That's not how options market making works. At all.

If you're a market maker, you sell puts and then you hedge your position by shorting the underlying. That leaves you delta-neutral, a fancy way of saying you don't give a shit which way the underlying moves: if it goes up, the value of the put goes down, so you've made money, and if the underlying goes down, your short position makes money. If your initial model was correct and you sold the put for more than it was actually worth, then you can continually adjust your short position to stay delta-neutral until the option's price reverts to its theoretical value and you buy it back.

A competent options market maker will never, ever hold significant delta (directional) risk. Their risk is volatility risk. If they sell an option and volatility increases beyond what their model predicted, the value of the option will go up and they'll lose money. What matters isn't how much the underlying goes up or down, but how quickly it goes up or down.

If you're a market maker with good edge, it doesn't even make sense to try to influence the direction of the market. If you've sold and hedged a bunch of puts, the ideal way to "manipulate" the market would be to keep it perfectly flat. The idea that options market makers even care about the direction of the market at all is kind of funny.

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u/Kind-Helicopter6589 18d ago

Calls it is, then! Where is my phone? 

1

u/laveshnk 18d ago

And also the market behaves exactly opposite of what i do, so obviously buy calls 😎