Big data giant Palantir Technologies (PLTR) soared over 20% following an earnings beat earlier this week. One trader sees the jump higher fizzling out over the coming weeks.
That’s based on the March $105 puts. With 43 days until expiration, 2,916 contracts traded compared to a prior open interest of 124, for a 24-fold rise in volume on the trade. The buyer of the puts paid $9.67 to make the bearish bet.
Palantir shares recently soared to around $105, making this an at-the-money trade. Shares are at a new 52-week high after soaring over 500% in the past year.
Operationally, Palantir has performed well, although not as well as shares. Earnings have doubled in the past year, and revenues are up 30%. Palantir’s profit margin stands at 18%, which is good compared to most companies but somewhat lackluster for a software and data play.
Action to take: Palantir shares have gotten overbought following their massive jump higher, and could see some pullback in the weeks ahead. That’s similar to the company’s move to $80 per share late last year, followed by a drop to the $65 range before heading higher.
For traders, the March $105 puts are well positioned for a short-term pullback. More aggressive traders may want to use a lower strike price to put less capital into the trade. Either way, traders should look to take quick profits on a pullback, given Palantir’s long-term strength.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
