Elon Musk stocks take $1.5 trillion hit with fresh test in SpaceX lockup ahead

It's been a rough month for Elon Musk, if there is such a thing for the world's richest man.

SpaceX and Tesla have erased a cumulative $1.5 trillion in market cap since mid-June, after an almost 50% sell-off in SpaceX since its high and an 18% drop in Tesla since earnings last week.

It might get even crazier next week, based on options pricing around SpaceX's earnings report on Tuesday, and the end of the lockup period for SpaceX insiders two days after.

Options prices are implying a 15% swing in SpaceX after earnings, with implied volatility of 122 in the stock – higher than every company in the S&P 500 other than SanDisk, which dropped 16% on Tuesday. Earnings also trigger the company's unique lock-up period, which allows insiders to begin selling shares earlier than the typical 180-day period. That puts a total of more than 900 million shares, or 20% of their eligible locked-up stock, on the table for trading.

TSLA, SPCX since mid-June

The early lockup two days after earnings presents a tricky setup for options traders, who can usually count on a stock's implied volatility falling after earnings. Earnings present predictable risk for stockholders who often have to hedge their positions, and once that risk passes — even if the stock crashes, volatility usually declines.

For SpaceX, traders must ask which presents more risk to the stock — its first earnings, or the lockup period? If the lockup period leads to insiders selling stock, it could mean volatility either stays elevated or goes up after earnings.

The implied volatility of SpaceX contracts expiring Aug. 7 is 160, according to data from thinkorswim, compared to 55 for Tesla, which currently trades with an implied vol of 52.

SpaceX traders have largely retained their optimism throughout the decline. More calls trade on a daily basis than puts, with traders buying almost 100,000 calls on Tuesday, compared to just 46,000 puts.

That said, the divide between small and big traders is growing, with the latter group erring more on the side of caution. The most popular contract by volume Tuesday was the 330-strike calls expiring Next Friday, of which traders bought $770,000-worth across 21,000 trades, according to SpotGamma.

Sorted by size of trader, and the picture is still bullish, but much less aggressive: the 130-strike call expiring in November, which traded just 5,400 times but for $8.7 million of premium.