Palantir’s (PLTR) options volume Wednesday was 866,998, almost double its 30-day average. Of those options, 22 puts and 34 calls were unusually active -- defined as Vol/OI ratios of 1.24 or higher and expiring in a week or more.
The Put/Call volume and Put/Call open interest were bullish at 0.52 and 0.79, respectively. That’s not surprising given how popular Palantir stock is with investors--share volume yesterday was 86.4 million, more than eight million more than the 30-day average.
Analysts aren’t nearly as enamored with Palantir as investors. According to Barchart data, of the 15 that cover it, only two recommend it as a Buy (2.40 out of 5) with a mean target price of $25.87, well below where it’s currently trading.
If you like Palantir but don’t want to pay $43 a share for its stock, selling either of these unusually active options with strike prices in the $30s could be your ticket to income and a better entry price.
Why Not Sell the $39 Put?
Selling the $39 put, which expires in 16 days on Oct. 25, generates $31 in premium income. That’s an annualized return of 16.4% based on yesterday's closing price of $43.13. That’s quite attractive.
However, the net price you’d pay for 100 Palantir shares should you be asked to buy them would be $38.69, 9% lower than where it’s currently trading. On several occasions in 2024, its shares have fallen by 15% or more. For example, in four trading days, PLTR stock lost 18% in May.
So, unless you believe any fall into the high $30s would be temporary, it’s probably cutting it too close.
What About the $24 Put?
The last time Palantir stock closed below $24 was June 21. From the end of March through June 21, its shares traded between $21 and $24. So, while there is a real possibility that PLTR stock could trade below $24 by March 21, 2025, 163 days from now, the annualized return of 2.4% is just too low to justify the nearly six-month option play.
The $33 and $34 strike prices are the ones to focus on under $40.
Which Is the Better Put to Sell?
From yesterday’s action, it would seem that investors favor the $33 put more than the $34. The former’s volume was 2,428, 2.05x the open interest, compared to 1,267, 1.44x the open interest. The annualized return on the former is 8.0%, while the latter’s is 10.1%, 210 basis points higher.
Now, let’s consider those who are bearish on PLTR stock and are buying the puts. The $33 put starts making money for the buyer at $31.95 based on the ask price of $1.05, compared to the $34, which is in the money at $32.75.
As I’ve said many times, although I’ve written about stocks for several decades, I’m a newbie regarding options. However, even my pintsized brain can see that something’s at play here.
If you were bearish about Palantir stock, would you hesitate to spend an additional $20 per contract to be in the money 80 cents sooner? I don’t think so.
This suggests that much of the volume was investors selling these puts, not buying them.
From where I sit, selling the $34 put appears to be the play to generate income and possibly a good way a better entry point into owning Palantir for the long haul.
Final Thoughts on Palantir
I’m bullish on Palantir stock. CEO Alex Karp is a brilliant person who understands the possibilities of AI.
In July, I suggested that the Dec. 18/2026 $32 call was a good play for anyone looking for DTEs (days to expiration) beyond 365 days. With a DTE of 890 days, it had an ask price of $9.75. Today, the ask price as I write this is $20.10, more than double what it was three months ago.
“I remain bullish about Palantir’s future with or without Oracle. Collaboration is icing on the cake. The company continues to generate greater revenue from its top 20 clients -- something like $55 million per customer, or $1.1 billion -- the Oracle collaboration should help bump that figure higher in 2024 and beyond,” I wrote on July 12.
I don’t think there’s any question that Palantir could be a $100 stock by late 2026.
So, the Dec. 18/2026 $60 call has a current ask price of $10.10, slightly above the $9.75 in July. Based on a delta of 0.53768, you can double your money by selling the call before December 2026 if the shares appreciate by $18.78 (44%).
I’d be shocked if you couldn't make money on this trade.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
