Options traders are piling into Palantir calls ahead of Monday night's earnings, betting the stock can shake off its nine-month bear market in a rally like the one that followed a similar chart setup in Microsoft before its own report. Options pricing points to a bigger-than-usual swing, even as some of the day's largest trades bet against a big rally.
Palantir shares gained 2.37% to $125.98 by 3:04 p.m. ET Monday, hours ahead of its earnings report, as options traders loaded up on bullish bets.
Hopes are running high that Palantir can shake off its nine-month bear market and rally after Monday night's results, a setup that mirrors what preceded Microsoft's own earnings. Microsoft's chart looked similar heading into that report, and the stock is now in the middle of a three-day, 25% bounce.
Traders load up on calls
More than twice as many Palantir calls traded as puts by volume Monday, with traders buying 56,000 calls and fewer than 25,000 puts, according to ThinkOrSwim data. Of the $160 million in premium traded, $120 million was tied to calls, and the top five contracts traded by volume were all calls, according to SpotGamma.
The most popular contract for bulls was the 130-strike call expiring Friday, where traders bought 8,500 contracts totaling $4.4 million, according to SpotGamma. Trading at $5.30 a contract, the 130-strike calls need an 8% rally by the end of the week to pay off. The 150-strike and 140-strike calls ranked second and third by volume.
Options price a bigger-than-usual swing
Options pricing implies a 10.5% move in Palantir shares after earnings, according to Cboe LiveVol data. That's wider than the stock's median 7.4% move over the past year. That implied volatility has overestimated the actual move for five straight quarters, the data show.
Bearish bets lurk beneath the call buying
The heavy call volume doesn't mean bears are staying quiet. In fact, seven of the eight biggest dollar-amount trades of the day were neutral or bearish, according to Cboe data.
Among those trades, the biggest by premium was a sale of 800 of the 145-strike calls expiring in mid-December 2028, a bearish bet against extensive gains that brought in $3.4 million for the seller.
Source: CNBC
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