Palantir Technologies (PLTR) is scheduled to report its earnings this Friday, prompting analysts to suggest a specific options strategy to capture volatility [1].
This timing is critical for investors because earnings releases often trigger sharp price swings. High implied volatility creates an opportunity for traders to collect higher premiums by selling options, provided they are comfortable with the associated risk.
Analysts recommend selling a put option with a strike price of 110 [2]. This specific contract is set to expire on Aug. 7 [2]. According to reports, selling this put could generate approximately $230 in option premium [2].
Selling put options before a company's earnings announcement can be a valid strategy for options traders seeking to capitalize on higher than normal volatility, MSN Technology said [3]. The strategy essentially bets that the stock price will remain above the strike price or that the volatility will collapse after the news is released.
While individual options trades are common, some investors use exchange-traded funds to gain exposure. The PLTW ETF, which tracks Palantir daily using swaps, has a 40% yield [4]. However, this approach has not been without risk, as net asset value erosion has led to steep losses for some participants [4].
The upcoming earnings report will serve as a catalyst for the stock's short-term trajectory. Traders using the naked put strategy are essentially agreeing to buy the stock at the strike price if it falls below 110 by the expiration date [2].
“Selling the Aug. 7‑expiring put with a strike price of 110 could generate around $230 in option premium.”
The focus on selling puts indicates that market participants expect significant price movement but may believe there is a floor to how far the stock will drop. By selling the premium, traders are leveraging the 'volatility crush' that typically occurs immediately after an earnings announcement, where the uncertainty—and thus the price of options—drops sharply regardless of the stock's direction.
