Space Exploration Technologies Corp (SPCX) post-IPO honeymoon appears to be over. Shares of the commercial space giant fell below their $135 IPO price on Wednesday, touching a record low of $132.75 before trimming some losses. The stock has now declined more than 30% from its June peak of $225.64, marking its first significant correction since going public and putting a spotlight on the growing lineup of ETFs built around the company.

The pullback comes at a pivotal moment for ETF investors. Over the past several weeks, issuers rushed to launch leveraged, inverse and income-oriented products tied to SpaceX after its blockbuster market debut. Now, with the stock under pressure ahead of a closely watched Starship test flight and next month's earnings report, these funds are facing their first real test as traders position for heightened volatility.

Leveraged ETFs Become a Volatility Play

The sharp decline has transformed SpaceX from a momentum trade into a volatility trade.

Bullish investors can express their views through ProShares Ultra SpaceX ETF (SPCF) and Tradr 2X Long SpaceX Daily ETF (SPCM), both of which seek to deliver twice the daily return of SpaceX shares. While these funds amplified gains during the stock's early rally after listing, they have also magnified losses as the shares retreated below their IPO price. Both the funds have lost almost 55% in the past month.

On the other side of the trade, inverse products such as Tradr 2X Short SpaceX Daily ETF (SPCG) and Defiance Daily Target 2X Short SpaceX ETF (SPCQ) have benefited from the recent selloff. SPCG has gained 70% in the past month while SPCQ is up around 63%. These funds are designed for short-term tactical traders rather than long-term investors, as their daily reset feature can cause returns to diverge significantly from the underlying stock over longer holding periods.

The recent price action underscores the risks and opportunities associated with leveraged single-stock ETFs, whose performance is highly dependent on the stock's day-to-day moves.

Income Investors Have Another Route

Investors looking to maintain exposure while generating income have another option.

The Kurv SpaceX Enhanced Income ETF (XSHP) employs a covered-call strategy, seeking to generate option premium from SpaceX's elevated volatility while retaining equity exposure. Such strategies typically outperform in flat or moderately declining markets, though they can cap upside if the underlying stock stages a sharp rebound.

With implied volatility likely to remain elevated ahead of major company events, option-income strategies could attract investors seeking to monetize the uncertainty surrounding SpaceX's near-term outlook.

Starship Flight Could Be the Next Catalyst

Despite the recent weakness, Wall Street remains overwhelmingly optimistic. According to reports, 21 of 31 analysts rate the stock a Buy or Strong Buy. Needham recently lifted its price target to $250, while maintaining a Buy rating.

The next catalyst arrives almost immediately.

SpaceX is expected to conduct the 13th test flight of its Starship rocket on Thursday night. The mission follows May's unsuccessful launch, when the Super Heavy booster sustained heat damage during stage separation and failed to complete its return after multiple engines did not reignite.

Starship remains central to SpaceX's long-term ambitions, including deploying larger batches of Starlink satellites, supporting future lunar missions and eventually enabling Mars exploration. A successful flight could help restore investor confidence, while another setback may intensify concerns about the company's execution timeline as it prepares for its first operational Version 3 payload mission later this year.

For ETF investors, the event could trigger another bout of heightened trading activity. Leveraged and inverse SpaceX ETFs are designed to magnify the stock's daily moves, making them among the most sensitive vehicles to any market reaction following the test flight. With the stock now trading below its IPO price but analysts largely maintaining bullish outlooks, the coming days could determine whether investors see the recent decline as a buying opportunity.