Trading in SpaceX options opened on Tuesday with heavy volume, underscoring strong investor demand for a new way to bet on the future of Elon Musk’s aerospace company.

More than half a million contracts changed hands in the first hour of trading as investors flocked to the newly listed company, making SpaceX the most traded name among companies on the first day of their options trading, according to Trade Alert data.

“Early option volume indicates another success for SpaceX,” said Seth Hickel, chief investment officer at Mindset Wealth Management.

Options give holders the right, but not the obligation, to buy and sell shares of a rocket and spacecraft manufacturer at a predetermined price within a specified period of time. They provide investors with a low-cost way to gain exposure to a company’s stock and can also be used to hedge against risk or speculate on price movements.

“SpaceX options opened with extremely heavy demand,” said Chris Murphy, co-head of derivatives strategy at market maker Susquehanna.

“Investors continue to chase upside in high-beta AI and space-linked winners,” Murphy said.

Some 869,000 options contracts had changed hands by 11:40 a.m. ET (1540 GMT), with leading calls 1.5-to-1, according to Trade Alert data.

Calls give the buyer the right to buy a stock at a specified price by a certain date, while puts give the buyer the right to sell at a specified price.

“It’s really kind of nuts,” said Brent Kochuba, founder of options analytics service SpotGama, noting that options demand was skewed toward bullish calls.

Kochuba said bullish options action could help the stock move higher early in the session.

An increase in options volume can sometimes cause the price of the underlying stock to swing as options dealers, who facilitate trading by taking the other side of an options trade, buy and sell shares at their own risk.

Dealers who sold SpaceX call options would need to buy increasing amounts of SpaceX shares to protect against rising shares, which would push the stock higher — a dynamic known as a gamma squeeze.

“If you’re a market maker, you can’t hedge SpaceX with anything other than SpaceX,” Kochuba said.

Tesla, another options market darling, is known to experience a gamma squeeze, analysts said.

heavy demand

Options on SpaceX were the second-most heavily traded contracts on individual companies on Tuesday, topped only by Tesla, Trade Alert data showed. The strong showing in SpaceX options followed a strong start on Friday, when the company’s shares jumped more than 25%, pushing its valuation above $2 trillion as investors bet on a formidable empire spanning rockets to AI.

“The stock is already on track to develop one of the deepest derivatives ecosystems of the single stock market,” Rocky Fishman, founder of Asym 500, a firm that provides data and analytics on the options market, said in a note.

“High equity volume, overlapping investor base with option-heavy Tesla and hedging demand are all reasons to expect SpaceX option volume from the outset,” Fishman said.

Options contracts are likely to have high volatility and wide bid-ask spreads due to high demand and limited nature of share float, he said. Shares of SpaceX rose more than 14% on Tuesday, briefly outstripping Amazon.com and Microsoft and making it into the top five most valuable companies in the days leading up to the blockbuster’s debut.