The bearish Tesla set-up we flagged forward of Wednesday’s report has delivered most of what it may well. Two methods ahead: financial institution the whole achieve, or press the identical playbook in opposition to one other priced-for-perfection identify reporting in two weeks.
Heading into Tesla‘s second-quarter report, I argued the dangers have been skewed to the draw back. Greeting a supply beat with promoting was a basic inform of expectations “priced for perfection.” While income of $28.2 billion beat handily, up 26% 12 months over 12 months, adjusted earnings of 34 cents per share missed the consensus (50 cents) by a large margin. Operating margin compressed to 1.4%, and a 142% surge in capital spending swung free money movement adverse. Combining disappointing EPS, a name for persistence (this is the sample with Tesla) on robotaxi, and the inventory slid roughly 14.5% Thursday, by way of our quick put strike, and closed close to the transfer focused by the commerce. Investors are apparently extra within the “show” moderately than the “tell” in Tesla earnings.
Which brings us to the much less glamorous however extra necessary a part of buying and selling: what to do when a place works. Our bearish construction has captured the majority of its most potential worth. When a lot of the doable revenue is already in hand, the maths flips in opposition to you — what’s left to earn is small relative to what you’d give again if the inventory snaps again (a chance I contemplate fairly unlikely). So that leaves us with a pair cheap paths:
Path one: take the cash and run. Close the place, ebook the achieve, and wait for one more fats pitch. There isn’t something flawed with this. There’s an previous noticed in investing: “One never loses money taking profits.” Platitudinous admittedly, however we’ll reserve a extra nuanced strategy for one more day.
Path two: financial institution most of it, and press. Make an identical play with “house money”. Somewhat emboldened, redeploy a portion of the income towards one other high-multiple pioneering firm whose valuation and value motion make it susceptible to disappointment: Palantir, which studies August third.
The counterpoints on Palantir
Palantir is a exceptional firm, one in all my favorites truly. But a number of counterpoints deserve weight heading into the print. The acknowledged ambition to develop revenues tenfold with out scaling the gross sales pressure is, to place it charitably, bold. Competition amongst LLM suppliers is prone to intensify, and enterprise prospects more and more look to deploy giant language fashions immediately moderately than by way of an middleman platform. The whole addressable market, whereas giant, is finite — and worldwide gross sales are prone to be constrained by the comprehensible choice for native distributors wherever nationwide safety is worried.
The numbers, whereas good, have been much less good final quarter. Commercial backlog progress slowed to 12% within the first quarter, per Bloomberg, down from 21% within the fourth quarter of 2025. And even internet of its current declines, Palantir trades at a cloth premium to its software program peer group — and effectively above its personal historic EV/gross sales common.
For context, the typical transfer in Palantir from one week earlier than earnings (about the place we’re now) by way of two weeks after (in keeping with August common manner expiration) is roughly 26%!
Palantir, YTD
The choices market is pricing a one-day earnings transfer of 9.5% — bigger than the previous 4 quarters delivered, however considerably under the long-term common of greater than 14%. That suggests August choices, costly as they seem at 65% implied volatility, could also be fairly priced, significantly for those who use spreads, promoting one costly possibility in opposition to one other to neutralize the volatility premium.
So, what to do.
Step 1: Close the TSLA place — promote the August 360/330 put unfold, banking at ~$23, effectively greater than a double from the value at which we put it on.
Step 2 (for these urgent): Buy the PLTR August twenty first $120/$95 put unfold for ~$6.50, funded with a portion of the TSLA proceeds.
Risk is outlined to the debit paid.
Max revenue: the $25 unfold width much less the debit, if PLTR closes at or under $95 at expiration — a decline of roughly 23% from present ranges, in step with the historic three-week earnings window.
The quick $95 put materially offsets the 65% vol premium embedded within the lengthy strike.
Like the Tesla commerce, the Palantir put unfold affords outlined threat, and for these utilizing the proceeds from the winner in Tesla, lower than the “house money” (income) collected on the primary commerce.
