Unusual Options Activity: Palantir Technologies (PLTR)

Big data firm Palantir Technologies (PLTR) has doubled over the past year, but shares are well off their highs and have slid in recent weeks. One trader sees further weakness ahead.

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  • That’s based on the October $12.50 puts. With 25 days until expiration, 9,233 contracts traded compared to a prior open interest of 148, for a 62-fold rise in volume on the trade. The buyer of the puts paid $0.29 to make the bearish bet.

    Shares recently traded for about $14.00. So they’d need to drop about $1.50, or just over 10 percent, for the options to move in-the-money.

    Such a move is possible, given the stock’s volatility. That’s still well over Palantir’s 52-week low of $5.84 per share.

    Palantir has managed to grow revenues by 13 percent over the past year, although the company still hasn’t turned a profit. With over $3 billion in cash on hand and little debt, however, the company can continue without getting into trouble for some time.

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  • Action to take: Shares are nearing oversold territory. Investors may want to consider buying at or under current prices, as shares are undervalued relative to the company’s future prospects.

    For traders, a potential rebound snapback could occur in the coming weeks. The October $12.50 puts could see a quick gain in the next day or two, and traders could potentially make low-to-mid double-digit returns from here.

    However, buying a longer-dated call, like the January $17 calls for about $1.05, could lead to mid-to-high double-digit returns on a jump higher for Palantir.


    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 of the companies mentioned in this article.

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