Big data giant Palantir Technologies (PLTR) has sold off in recent sessions, amid fears of a slowdown in consumer spending. One trader is betting on a rebound in the weeks ahead.
That’s based on the April $185 calls. With 52 days until expiration, 7,123 contracts traded compared to a prior open interest of 182, for a 39-fold rise in volume on the trade. The buyer of the calls paid $0.50 to make the bullish bet.
Palantir shares recently traded for about $105, meaning shares would need to rally by about $80, or about 76%, for the option to move in-the-money.
The recent decline in shares has taken the stock off its 52-week high of $125.41, and the stock is still up over 50% year-to-date.
Palantir has been soaring on increased contracts, centered around defense and intelligence spending. Proposed budget cuts for the military could mean that future contracts are delayed and current contracts may face lower pricing.
Action to take: Palantir are selling on the headlines for now. If the news cycle turns out to be less fearful than expected, Palantir could be on track for a sharp rebound in the weeks ahead.
For traders, the April $185 calls are aggressive, but inexpensive enough to see triple-digit returns, even if the stock doesn’t move in-the-money. Traders who are quick to take profits can likely see good returns in the next few days on a bounce higher.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.