Palantir Technologies (PLTR) has recently experienced a dramatic surge, driven by news of potential shifts in U.S. government defense spending and CEO Alex Karp’s plan to sell over $1 billion of his holdings. The stock soared as much as 19.7% in the past week, hitting a new high of 125.41 with weekly volume jumping over 40% above its 10-week average.
With heightened volatility comes opportunity, and for investors looking to capitalize on Palantir’s next big move, an advanced options strategy like the double butterfly could be a compelling choice.
Understanding the Double Butterfly Strategy
A double butterfly is designed to profit from significant price swings, whether up or down. This strategy merges a long call butterfly and a long put butterfly, providing a structured risk-reward setup in the face of substantial stock movement.
Long Call Butterfly Setup:
A long call butterfly consists of:
- Buying one lower-strike call
- Selling two at-the-money calls
- Buying one higher-strike call
The key benefit? If Palantir stock surges to 150, this position could yield a maximum profit of $2,000, minus the cost of the trade, currently set at $105.
Long Put Butterfly Setup:
Similarly, a long put butterfly includes:
- Buying one higher-strike put
- Selling two at-the-money puts
- Buying one lower-strike put
This setup benefits from a strong downside move, ensuring the trade remains structured to capture profit in either direction.
Why This Strategy Works for Palantir Stock Now
Massive price jolts tend to shake out weak hands while setting the stage for the next major move. Given the uncertainty around future government contracts and management’s large stock sale, the potential for high volatility is undeniable. Whether the stock continues its rally or faces a sharp pullback, the double butterfly options trade allows investors to capitalize on Palantir’s wild price swings with a controlled risk profile.
Options traders seeking to leverage this moment in PLTR stock should consider this advanced strategy as an opportunity to play both sides while maintaining a defined risk. With earnings and further developments ahead, the time to act may be now.
