On June 26, after SpaceX began to break into the index, how did hundreds of billions in funds buy in? Will SpaceX be subject to a short squeeze?

Author: SoSoValue Research

If you open any stock trading software or trading forum right now, you will likely come across similar posts:

"$SPCX is about to enter the Nasdaq 100, hundreds of billions in passive funds are coming to lift it, should we position ourselves?"

"Effective on July 6, will it directly surge by 20 points that day?"

As of the time of writing, according to the market data from the decentralized RWA asset trading platform SoDEX.com, the perpetual contract price of SpaceX ($SPCX) has been hovering around $150. A company that has not yet been officially included in the index has already "taken off" with a total market value reaching $2 trillion, which showcases the magic of speculative expectations.

If you have started pondering these questions, it means you are thinking deeper than 70% of traders. But the truth may shock you—those hundreds of billions in buy orders will not foolishly rush in on the "effective date" to lift you up. The image you imagine of "big players buying in one click" does not exist in Wall Street's script.

In today's article, we will thoroughly dissect and clarify the seemingly simple matter of "index inclusion." You will find that behind this is a carefully orchestrated, multi-layered liquidity structure, and if you do not understand the rules of the game, you may very well go from being the "lifter" to the "bag holder."

1. The "master" you think exists actually does not

The image in retail investors' minds usually looks like this:

At 9:30 AM on July 6, the Nasdaq Exchange rings the bell. A "master of index funds" controlling hundreds of billions gives the order, and traders hit enter, a massive buy order directly floods the market, and the price of $SPCX skyrockets.

Very exciting. Very passionate. But that is not the case at all.

In reality, those hundreds of billions are scattered among hundreds of fund companies. BlackRock, Vanguard, State Street, each manages funds tracking different indices. They do not conspire, do not have a unified command, and are even competitors. However, their operations may synchronize at a certain moment, not because someone is directing them, but because they all adhere to the same iron rule:

"Minimize tracking error."

The KPI for passive funds is not "how much money was made," but "how much they deviated from the index." Buying at a discount is not a good thing; buying at a premium is a big taboo. Because as long as the transaction price differs from the closing price used for index calculations, a tracking error occurs. If the error is large, fund managers may face a bonus deduction or even lose their jobs.

Therefore, what these people fear most is "drawing attention." Their only wish is to buy all the necessary stocks on the effective date at a price as close to the closing price as possible. They do not seek discounts, do not seek the spotlight, and complete their tasks like invisible people.

So the question arises: hundreds of hungry men must rush into the same supermarket at the same time to grab the same hot item, and the boss's order is—whoever buys at a premium, whoever gets fired.

What do you think they will do?

2. Two indices, two scripts—But neither will act on the "last day"

This time, SpaceX is being included in two indices: the Russell US Index and the Nasdaq 100. Their game rules are different, leading to completely different buying rhythms.

Script One: Russell Index—The action happens in the last minute of trading

The rules of the Russell Index are simple and brutal: adjustments are announced on June 26, and they take effect after the market closes that day. There is no hesitation period, no transition period.

Retail investors usually think that on June 26, all funds tracking Russell will be frantically buying throughout the day. But if you really watch the intraday chart that day, you might be disappointed—the stock price may be calm, and the trading volume may not be as explosive as imagined.

Because all the buy orders are compressed into that moment at the close.

Wall Street has a tool invented specifically for this day, called "MOC orders" (Market-On-Close). In plain language, it means: "I don't care what the transaction price is; at the moment of the closing auction, you must buy all the goods I need."

On the annual reconstitution day of the Russell, tens of trillions of dollars in passive funds will converge into an MOC torrent in the last few minutes before the close. The closing auction trading volume on the NYSE and Nasdaq will explosively increase several times. You may think nothing happened after watching the market all day, but in reality, the true massive turnover has quietly completed within seconds of the closing bell.

You did not see the volume increase because you did not focus on those few seconds.

Script Two: Nasdaq 100—A "legal front-running" 10-day window

The rules for Nasdaq are different. According to forecasts, SpaceX will be announced for rapid inclusion on June 26, and it will officially take effect on July 6. The 10 days in between are the most exciting phase of the entire game.

Many retail investors will be torn: should they buy on the announcement day or wait until the effective day?

The answer is: what you are thinking, Wall Street has already thought of, and they are already operating with real money. During these 10 days, there will be three waves of participants in the market:

• First wave: Arbitrage funds—legal "lifter." On the day of the announcement, this group starts to grab shares. Their logic is simple and brutal: on July 6, hundreds of billions in passive funds must buy regardless of cost, so if I buy now, I can sell to them at the closing auction later and make a profit. They are not betting on whether SpaceX's fundamentals are good or not, but on the rigidity of "passive funds' buying."

• Second wave: More aggressive index funds. They fear that the free float will be too small on July 6, making it difficult to buy enough shares, so they will start buying a day or two in advance, breaking it down into small orders and secretly accumulating in the secondary market.

• Third wave: The most rigid index fund army. They strictly adhere to the rules, leaving the largest buy order for the closing auction on July 6, trying to solve it all at once with MOC.

So, the real script for the 10-day window is: in the first few days after the announcement, arbitrage funds push the stock price up; in the middle days, front-running funds secretly accumulate; on the last day, the main army completes precise matching with the arbitrage funds at the moment of the close.

The painful conclusion is: if you rush in on July 6, thinking passive funds are coming to lift you up, you are likely to be the bag holder sold to by the first two waves.

3. Lock-up period: This is the ultimate boss determining "whether it will surge or not"

The above analysis is based on a basic assumption—that there are enough circulating shares in the market for you to buy.

But SpaceX precisely breaks this assumption.

The IPO was on June 12, and the gap to June 26 and July 6 is less than a month. According to traditional IPO lock-up rules, the vast majority of original shareholders' stocks are firmly locked for 180 days. The actual "free float" that can be freely traded in the secondary market may only account for a fraction of the total share capital.

Now let's do some math: assuming SpaceX's market value reaches $2 trillion after going public, with a free float ratio of 15%, then the free float market value is only $300 billion. And just the passive funds for the Nasdaq 100 are expected to buy between $10.2 billion and $12.7 billion. This means they need to consume over 4% of the free float in the market.

4%, within a single day. And it will be grabbed by hundreds of hungry men using MOC orders at "any price."

If this money all rushes in, directly sweeping the market at the closing auction on July 6, the stock price may not just rise a few points, but could spike by dozens of points or even more exaggerated pulses.

So, how do Wall Street's hungry players avoid this stampede? The answer may surprise you again: they do not rush into the "supermarket" at all.

• First route: "Backdoor" block trades

  Fund managers will directly call the sales trading desk of investment banks: "Bro, help me privately find a few institutions with large holdings. I will negotiate prices with them off-market and get them to transfer several hundred million dollars' worth of stock to me. Don't create chaos in the public market." These off-market block trades do not go through the exchange's central matching, and the transaction price is negotiated between the parties, with transaction details possibly disclosed days later. You watch the candlestick chart, and see nothing.

• Second route: "Detour" derivatives

  A more advanced play is to sign a total return swap agreement with large shareholders still under lock-up. In simple terms: you keep holding the stock, nominally it’s still yours, but all future gains and losses from the stock price fluctuations are mine. Through this financial derivative arrangement, index funds perfectly bypass the legal restrictions of "lock-up cannot be transferred" and the public market system of the exchange.

The ultimate truth is: the hundreds of billions in index buy orders you see will mostly not appear in the volume bars of the candlestick chart. They have quietly completed through block trades and derivatives in "dark pools" and off-market where you cannot see.

You have been waiting for signals of explosive growth, but the real smart money has already "covertly completed" its purchases.

4. Retail survival guide: How can ordinary people participate?

After discussing so much about "what cannot be done," you must be wondering: how should I participate?

First, a cruel premise: in terms of information, tools, and channels, ordinary retail investors are completely unequal to institutions. Trying to gamble against institutions for short-term gains has a lower success rate than guessing a coin toss. So we will only discuss relatively stable, "dumb methods" that do not rely on insider information.

• Lower strategy: Chase the trend and bet on direction

  Some retail investors see the announcement on June 26 and think the stock price will definitely rise, so they rush in to chase the high. Others with more guts may use derivatives to amplify their gains. In such a fierce competitive landscape, misjudging the direction combined with high leverage can lead to liquidation in an instant. You think you are arbitraging, but in reality, you are fighting against well-equipped institutions.

• Middle strategy: Wait for emotional lows and become a long-term shareholder

  The logic is simple: index inclusion brings structural passive fund demand, which is real and long-term. However, short-term prices will be greatly affected by arbitrage funds and emotions, leading to significant fluctuations. If you are optimistic about SpaceX in the long run, it may be wise to wait until the dust settles—such as a week or two after the effective date, when arbitrage funds have finished unloading, trading volume returns to normal, and the stock price stabilizes, then consider building a position gradually. When building a position, you might consider using leveraged tools, such as SoDEX.com, a currently popular decentralized RWA trading platform that supports up to 20x leverage for investing in SpaceX. This way, you profit from the company's growth. Recently, SoDEX also launched a $SPCX trading event with a prize pool of up to $100,000, which can also increase additional returns.

• Upper strategy: Use options to profit from volatility—most stable and technical

  Before and after index inclusion, the greatest certainty is not whether the stock price will rise or fall, but that volatility will definitely spike. Everyone knows that large funds are coming, but no one can say exactly which day it will erupt. This uncertainty will push option prices (premiums) to very high levels. This gives option sellers a natural advantage. A classic stable strategy is to sell a strangle when implied volatility spikes—simultaneously selling an out-of-the-money call option and an out-of-the-money put option. You are not making money on the direction of the stock price, but on the belief that "the stock price will not rise so crazily, nor will it fall so drastically." As long as the stock price is between the two strike prices at expiration, you will securely collect all the premiums. Why is this strategy relatively stable? Because you are on the side of time. Arbitrage funds and passive funds will most likely complete their turnover through off-market dark pools, and the real volatility reflected in the candlestick chart is often not as exaggerated as what is priced in options. You profit from "mispricing."

Of course, it must be reminded: if an extreme black swan occurs (such as lock-up shares suddenly being allowed to be sold early), the seller's losses are theoretically unlimited. It is essential to strictly control positions and have a stop-loss plan in place.

Core mindset: In this game, what retail investors should learn is not "how to race against institutions," but "how to use the rules and restrictions of institutions to find where they misprice." Options volatility arbitrage is one of the relatively high-probability strategies.

5. So, will SpaceX really surge?

By now, you should be able to answer this question for yourself.

It may rise, but it is definitely not the kind of "instant surge of dozens of points on the effective date" you imagine.

The real market action is likely to occur during the warm-up period after the announcement on June 26. Arbitrage funds and front-running funds will be competing there, pushing the price to a balanced level. And on July 6, the effective date, you may see a strange phenomenon—huge trading volume, but the stock price remains calm. Because both buyers and sellers complete precise matching at the moment of the closing auction.

The "great battle" you imagine is actually a "delivery ceremony" that has been meticulously rehearsed. The passionate charge has already sounded before the battle begins. By the time you hear the sound and rush in, the battlefield is left with only the scattered sounds of cleaning up the aftermath.

So, returning to the question at the beginning of the article:

How did hundreds of billions in funds buy into SpaceX?

The answer is: they have already completed their purchases in places you cannot see, using tools you cannot imagine, while you were relaxed.

At the index table, the most important thing is not to guess the size, but to understand the rules of the game. Otherwise, you won't even know how you lost.