Options Activity Points to More Volatility for Palantir Stock

Key Points

• Palantir stock trading was paused on Monday after the stock rallied hard after last week’s drop of more than 15%.
• The PLTR stock options chain shows high volume, with call volume outnumbering put volume.
• In the long term, Palantir’s unique business model holds up, but its liquidity makes it an easy target for sellers looking to raise cash quickly.

Palantir Technologies NASDAQ: PLTR is becoming the stock that just won’t listen to reason. After falling about 15% and even more in after-hours and pre-market trading, PLTR stock came roaring back on April 7, with trading on the stock activating a limit up/limit down (LULD) pause.

Many investors are wrestling with the question, "Why?" There could be many answers, but one place to look for clarity could be the company’s options chain, which suggests that a volatile stock like Palantir is still the target of options traders.

PLTR stock is seeing a high volume of options activity for the week ending April 11. Calls outnumber puts, with the $80 strike showing the highest call volume and the $60 strike leading in put volume.

However, the general belief based on the option chain is that the stock will land somewhere in the $70 to $80 range. At the high end, that’s about a 10% gain from the week ending April 4. This suggests that options traders believe the bottom could be in for Palantir stock.

Monday morning’s trading action supports that view, as PLTR stock triggered a limit up/limit down pause due to heavy buying after dipping below $70 per share.

Palantir’s Unique Advantage Makes the Bulls' Case

The key concern about Palantir stock is its lofty valuation. Even after the recent sell-off, PLTR still trades at a forward price-to-earnings (P/E) ratio of 246x, and its price-to-sales (P/S) ratio sits around 62x. That’s down from a peak of over 100x in early February, but it remains well above typical valuation metrics.

Much of this concern stems from comparing Palantir to traditional software stocks. However, Palantir doesn’t fit neatly into any one category. It’s not purely a software-as-a-service (SaaS) company, nor is it exclusively a cloud or artificial intelligence (AI) provider.

Instead, it blends elements of each, operating as a category of its own. The company’s real differentiator is its ontology — what it calls “the operational layer for the organization.” Sitting on top of a company's digital assets, the ontology acts as a digital twin, enabling large language models (LLMs) to deliver highly relevant, actionable insights. This unique architecture sets Palantir apart and strengthens the bullish case, even at a premium valuation.

Why Palantir’s Liquidity Makes It a Prime Sell-Off Target

The simplest reason why Palantir, along with many technology stocks, are falling harder than other stocks is simply because that’s where the money is. If institutional investors need to raise cash quickly, they will look at stocks that have delivered the strongest gains. And one of those is Palantir.

That doesn’t mean that Palantir isn’t overvalued. It also doesn’t mean the company has a clear and present risk to its business. Nevertheless, if markets remain under pressure, there’s ample reason to believe that PLTR stock may have further to fall.

Palantir Stock Doesn’t Come With a Tariff Risk, But Other Risks Remain

Palantir stock doesn’t come with a tariff risk, but it still carries risk that goes beyond a lofty valuation. The risk that’s garnered the most headlines recently is that the company’s business with the U.S. Department of Defense (DOD) may be at risk. Defense Secretary Pete Hegseth has commented that a software program was among the budget cuts.

Many investors are thinking of Palantir. On the other hand, the company has entered into partnerships with Archer Aviation Inc. NYSE: ACHR and Anduril, which positions it to handle the demands of modern warfare.

That’s why investors shorting or considering shorting PLTR stock based on lower U.S. government revenue may be missing the bigger picture. Retail investors have successfully capitalized on this narrative before.