What Palantir, Uber, and Fortinet's Options Trading Tells Us About the Stocks' Post-earnings Movements

Palantir Technologies (PLTR) posted quarterly results this week, and options traders had been bracing for a big reaction. The near-term straddle was priced at 19.25 points about 12% signaling expectations for a sharp post-earnings gap. While the stock delivered a sizable two-day move after reporting strong numbers, the one-day jump came in at 13 points, short of the full anticipated swing.

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Uber Technologies (UBER) also had high expectations heading into its earnings report. The options market was pricing in a move of 6.5 points, or roughly 7.2%. Instead, the stock barely budged marking the second straight quarter where Uber’s post-earnings move was muted. Analysts may be getting better at forecasting its results.

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The opposite scenario played out with Fortinet (FTNT). The cybersecurity company reported earnings after Wednesday’s close, missing estimates by a wide margin. The stock plunged in Thursday trading. In this case, the straddle was priced at 9.50 points, or 9.7%, which turned out to be a bargain for traders who bought it.

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When evaluating straddles, the current price is often compared with the stock’s history of post-earnings moves. Fortinet’s 9.7% straddle was cheaper than six of its last 10 earnings reactions slightly tilting the odds in buyers’ favor. Uber’s 7.2% price was cheaper than only four of the last 10, making it less attractive. Palantir’s 12% straddle landed in the middle, cheaper than five of its past 10, essentially a coin toss.

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The S&P 500 Index (SPX) looked like it was starting a correction last week, but the downturn lasted only a couple of days before the rally resumed. Strong support has formed at 6,200 tested twice in the past month with additional support near 6,150, which marked February’s record highs. A drop below 6,150 could trigger heavier selling, but for now, the SPX chart remains bullish.

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Some sell signals have appeared, though the market seems to be largely ignoring them. A McMillan Volatility Band (MVB) sell signal was triggered when SPX fell below 6,316 on August 1. This signal remains active and would be canceled if SPX closes above the +4σ modified Bollinger band, now approaching 6,500.

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Equity-only put-call ratios have been rising for the past couple of weeks, a bearish development. This sell signal would reverse only if the ratios peak and trend lower again.

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Market breadth has been mixed. Both breadth oscillators recently generated sell signals, though the stocks-only oscillator has since recovered enough to issue a buy signal. The NYSE-based oscillator, however, is still bearish, leaving the category neutral overall.

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New lows on the NYSE briefly outpaced new highs for one day not enough to stop out the buy signal in place since late June. Two consecutive days of new lows exceeding new highs would be needed to reverse it.

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The 20-day historical volatility of SPX (HV20) rose from 6% to 10% after recent market moves, triggering a fresh sell signal. While HV20’s track record is uneven, when correct, it tends to signal significant moves as seen in its successful July 2024 call.

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The VIX spiked briefly last week when SPX sold off but has since eased to around 16. This drop confirmed a new “spike peak” buy signal on August 4, which will remain valid for 22 trading days unless VIX closes above its recent high of 21.90. The longer-term VIX trend buy signal, active since June, also remains in place unless the index closes above its 200-day moving average for two straight days.

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Volatility derivatives continue to signal a bullish outlook. Both VIX futures and Cboe volatility indices show upward-sloping term structures, with VIX futures trading at a healthy premium over spot VIX. The weighted futures measure (VOLFUTA) stands at 1.90, well above cautionary levels.

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Overall, the SPX remains in a bullish pattern, backed by strong support levels and several active buy signals. However, recent sell signals should not be ignored. Traders are advised to follow each signal’s targets and stops closely, while continuing to roll deeply in-the-money options to protect profits and limit downside risk.

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New Recommendation: VIX “Spike Peak” Buy Signal

• Buy 1 VIX September 19 at-the-money call
• Sell 1 VIX September 19 call with a strike 20 points higher
• Hold for 22 trading days from the August 4 signal date
• Exit if VIX closes above 21.90

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New Recommendation: Hewlett-Packard Enterprise (HPE) Puts

• A new put-call ratio sell signal has emerged for HPE, which has already broken below support
• Buy 4 HPE November 21 $20 puts at market price
• Hold as long as the sell signal remains active

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