Palantir options surge ahead of earnings, mirroring Microsoft rally

Hopes are running high that high-profile software provider Palantir can shake off its nine-month bear market and rally after earnings Monday night.

After all, the chart of Microsoft was looking similar going into its report, and that stock's now in the midst of a three-day, 25% bounce. The options flows around Palantir also mirror Microsoft going into its report, where traders were scooping up calls and betting on a bigger-than-usual swing.

More than twice as many Palantir calls traded than 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, SpotGamma data show.

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 for $5.30 a contract, the 130-strike calls need an 8 percent rally before the weekend to pay off. The 150 and 140-strike calls were second and third-most popular by volume.

Cboe LiveVol data shows options pricing implying a 10.5% move after earnings, bigger than the median 7.4% move the past year. For the past five straight quarters, Palantir options have overestimated the actual move, the data show.

The heavy call volume doesn't mean bears aren't taking shots. In fact, seven of the eight biggest dollar-amount trades of the day were neutral or bearish, according to Cboe data.

That includes the biggest premium trade of the day, a sale of 800 of the 145-strike calls in Palantir that expire in mid-December 2028, a bearish bet against extensive gains in the stock that brought in $3.4 million for the seller.