Palantir’s Momentum Triggers Caution: Overbought RSI and Record‑Cheap Protective Puts Signal Hedging Opportunity

Palantir Technologies has surged more than 65% since its June 25 low, pushing the share price above $180. The stock’s 14‑day relative strength index (RSI) stood at 69.5 on Friday, just shy of the traditional overbought threshold of 70, indicating that a large portion of positive news is already priced in. Meanwhile, PutDex—an index tracking the normalized price of a 30‑day Palantir put option one standard deviation below the stock—remains in the bottom decile of its 52‑week range. This means that protective put options, normally sought by institutions to hedge against declines, are trading at historically low levels even as the stock trades near its yearly high.

The divergence between cheap puts and relatively expensive calls reflects unusually low fear among Palantir holders. For investors seeking downside protection, a Sept 25 $170 put can be acquired for about $5.90 (≈$590 per contract). That position becomes profitable if PLTR falls below roughly $164.10 at expiration, offering a defined‑risk hedge that costs little relative to the stock’s recent volatility.

Traders looking to reduce the premium can employ a put spread: buy the $170 put and sell the $155 put. This strategy lowers the net outlay to about $3.60 per contract while capping the maximum gain at $11.40 if the stock ends below $155. The spread thus risks $3.60 to potentially earn $11.40, providing a cost‑effective way to fade the current euphoria.

Overall, the combination of a near‑overbought RSI and record‑cheap protective puts suggests that Palantir is at a point where conventional wisdom favors further upside, but the options market signals that downside risk is under‑priced. Whether used as inexpensive insurance for long holders or as a defined‑risk trade for opportunistic traders, the current environment presents a compelling case for hedging against a possible pullback.

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