Disclaimer: Remember that everything discussed here is strictly for educational purposes only. Do your own homework and manage your risk accordingly. I am also long PLTR at the time of this writing.
Expected move: +/- $7.20 by Friday Feb 19
Upper Expected move: $41.20
Lower Expected move: $26.80
Potential move: +/- $9.20 by Friday Feb 19
Upper Potential move: $43.20
Lower Potential move: $24.80
Historical Volatility: 128.32%
Implied Volatility: 122.3%
Daily implied move: +/- 7.64%
Put-To-Call Interest: 0.87
1-year high: $45.00
1-year low: $9.18
Bullish Trade idea for Feb 19 expiration:
- Purchase a $35/40 call spread for a debit of $1.32
- Sell to open a $30 cash secured put for a credit of $1.55
- This trade generates a net credit of $0.23
- Max profit on the trade is $5.23 per contract and is achieved if PLTR remains above $40 at expiration
Neutral Trade idea for Feb 19 expiration:
- Purchase 100 shares of stock at $34.00 (for half the position you would like to own)
- Sell a cash secured put at the $30 strike for $1.55 credit (for the other half of the position in PLTR that you would not mind owning)
- Sell a covered call at the $40 strike for $1.90 (you can sell 1 call option per 100 shares you own)
- Your effective cost basis is $34.00 (price you paid for the stock) less $1.90 (covered call premium) less $1.55 (cash secured put premium) = $30.55
- If Palantir trades below $30 on expiration, 100 shares will be assigned (per cash secured put sold). This will bring the effective cost basis down to $30.28.
- If Palantir trades above $40 on expiration, the stock will be called away for a realized gain of $40 less $30.55 = $9.45. This represents a maximum potential return of 30.93% over a two week holding period.
Bearish Trade idea for Feb 19 expiration:
- Purchase a $32/28 put ratio spread for a debit of $0.71
- This trade is created by:
- Buying to open 1 $32 strike put
- Selling to open 2 $28 strike puts
- 1st Breakeven on this trade is $32 less $0.71 = $31.29
- 2nd Breakeven on this trade is the short strike less the spread width plus the net debit = $28 – $4 + $0.71 = $24.71.
- A key factor of this trade is that the trader is comfortable with owning Palantir stock at $24.71 since 2 puts have been sold while only 1 is owned, which will result in the assignment of 100 shares if the stock remains below $28 at expiration.
- Bullish trade idea modification – turn the bull call spread into a combo spread by selling the 45/50 call spread prior to expiration if PLTR rises to $40 prior to earnings as this will significantly reduce the net debit on the position.
- Neutral trade idea modification – if PLTR trades below $30 at expiration, sell covered calls 1 month out above the breakeven price to further reduce cost basis.
- Bearish trade idea modification – close 1 of the short puts out if PLTR trades significantly higher prior to earnings, which will remove assignment risk on the 2nd put that is sold.
- Earnings will be released on Tuesday February 16 before market open
- Palantir insiders were able to sell just 20% of their holdings when they direct listed
- Lockup period expires in mid-February (Feb 19th confirmed date) where insider shareholders will be permitted to sell the remaining 80% of their holdings
- Just announced a new 5-year deal with BP
For those of you who would like to watch the video discussing the information above, the link is here:
Please let me know if you have any questions.
Stay safe and healthy and trade well!