Options trader closes Tesla put spread, targets Palantir ahead of earnings
After capturing maximum value from a bearish Tesla options trade following a mixed second-quarter earnings report, a trader is redeploying profits into a put spread targeting Palantir ahead of its August results.
An options trader is closing a profitable bearish position in Tesla and redeploying a portion of those gains into a similar wager against Palantir. The shift highlights how market participants are rotating out of priced-for-perfection names as earnings season tests elevated technology valuations.
Heading into the second-quarter report, the trader established an August 360/330 put spread, arguing that downside risks outweighed the potential for a delivery beat. Tesla reported a 26% year-over-year revenue increase to $28.2 billion, beating expectations. However, adjusted earnings of 34 cents per share fell well short of the 50-cent consensus.
Operating margins compressed to 1.4%, and a 142% surge in capital spending drove free cash flow below zero. The stock subsequently slid roughly 14.5% on Thursday, allowing the trader to close the put spread for approximately $23, more than doubling the initial investment.
Rather than taking the profits and waiting for another opportunity, the trader is pressing the same playbook against Palantir ahead of its August 3 earnings report. The strategy involves buying an August 21 put spread with $120 and $95 strikes for a debit of about $6.50.
This structure offers defined risk limited to the debit paid, with a maximum profit achieved if Palantir closes at or below $95 at expiration. That would represent a roughly 23% decline from current levels, aligning with the stock's historical three-week earnings window.
The bearish thesis relies on Palantir trading at a material premium to its software peers and its own historical enterprise-value-to-sales average. Furthermore, commercial backlog growth slowed to 12% in the first quarter, down from 21% in the fourth quarter of 2025.
The company also faces intensifying competition from large language model providers as enterprise customers increasingly deploy these tools directly. Additionally, the goal of expanding revenues tenfold without increasing the sales force faces a finite total addressable market and international constraints tied to national security preferences.
The options market is currently pricing a one-day earnings move of 9.5% for Palantir, which sits above the past four quarters but below the long-term average of more than 14%. Historically, the average move from one week before earnings through two weeks after is approximately 26%.
With implied volatility at 65%, the trader notes that selling one expensive option against another helps neutralize the volatility premium. By using the proceeds from the Tesla winner, the trader is effectively risking less than the house money collected on the first trade while maintaining strictly defined risk parameters.
