If Palantir is close to bottoming, what’s the best play on PLTR stock?

Palantir Technologies Inc (PLT) Stocks may be near a bottom. I talked about this in a recent Barchart article from February 18: “Has Palantir hit rock bottom? Probably based on the huge and unusual put option activity on PLTR.”

PLTR Stock Is Now Down $135.24 per share as of Friday, February 20. That’s $58.93 off a recent high of $194.17 on December 24, 2025, a 30% drop in just 2 months. In my article I showed why PLTR is worth between $189 and $245 per share, or 40% to 81% more.

As usual, trend traders have increased put options on PLTR stock, even for out-of-the-money (OTM) put strike prices. That makes them attractive to short sellers, especially if PLTR is close to bottoming.

For example, shorting a PLTR put option at a strike price 7% lower than the current price yields a return of more than 3.6% over the next month. And an 11% lower strike has a return of 2.77%.

This can be seen in the Barchart options chain below for the period ending March 27, which is just over a month away.

It shows that the put strike price of $125.00, which is 7.6% lower than Friday’s close, has a midpoint premium of $4.58.

That means a short seller of this put contract can make $458 after taking out $12,500 in collateral. That is equivalent to a one-month return. 3.66%:

$458/$12,500 = 0.0366

Additionally, for more risk-averse investors, shorting the $120.00 strike price contract, down more than 11% from Friday’s close, produces 2.78%:

$333/12,000 = 0.02775

That’s after securing $12,000 in collateral with the investor’s brokerage firm.

Note that there is a large volume of put contracts at the $120 strike price, more than 1,000. This could be an indication that many traders still believe that PLTR will sink another 11%.

For potential investors in PLTR stock who short out-of-the-money (OTM), the worst that can happen is that your account buys PLTR stock.

But that only happens if PLTR falls 7% or 11% to $125 or $120 on or before March 27. The collateral already secured will be allocated to purchase 100 shares at the strike price.

However, if PLTR ends up below that strike price, it could result in an unrealized loss. That downside risk could force the investor to continue holding shares or sell them at a potential loss (only if they want to).

But all is not lost. Below are some beneficial or mitigating factors.

First, the investor has already received the short sale proceeds. That effectively reduces the actual purchasing breakeven point:

$125 – $4.58 = $120.42 breakeven point (i.e. 11% less)

$120 – $3.33 = $11.67 break-even point (-13.7% less)

These breakeven points are 11% to nearly 14% lower than Friday’s close at $135.24. Effectively, an investor is paid to wait to buy at significantly lower prices.

And for existing investors, it is a way to reduce the average cost of purchase, either from the proceeds received or from the lowest purchase if put options are assigned.

Second, delta ratios are low. That effectively implies that there is a low probability, based on past trading volatility, of PLTR falling to these strike prices.

For example, the delta ratio for the $120 strike price, when there are more than 1,000 contracts outstanding, is less than 22% (i.e. -0.2199). That means there is just over a 1 in 5 chance of PLTR falling 11% to $120 by March 27.

That’s why this 2.77% yield with the $120 strike price is so attractive.

Third, don’t forget, the worst thing that can happen with a short sale is that you own PLTR stock. I have proven that stocks are worth much more. Therefore, a buy and hold strategy has a good chance of working.

Finally, less risk-averse investors can purchase in-the-money (ITM) call options on longer time frames, using this short sale proceeds. I will write about this in a new Barchart article.

The bottom line is that the returns on PLTR put options are now very high, making them attractive to short sellers and potential buyers of value in PLTR stock.

On the date of publication, Mark R. Hake, CFA had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com