Notable Wednesday Option Activity: MU, AEHR, PLTR

Aehr Test Systems (AEHR) is seeing 11,567 options contracts traded today (~1.2M underlying shares), roughly 103.1% of its one‑month ADTV, led by 3,900 contracts in the $35 call expiring Feb 20, 2026 (~390k shares). Palantir Technologies (PLTR) shows 546,628 contracts traded (~54.7M underlying shares), about 102.6% of its one‑month ADTV, led by 24,317 contracts in the $135 put expiring Feb 13, 2026 (~2.4M shares). The concentrated strike/expiry activity in both names signals significant positioning that could presage elevated near‑term volatility.

Analysis

Market structure: Extremely large option flow in AEHR (11,567 contracts ≈103% ADTV) and PLTR (546,628 contracts ≈103% ADTV) implies directional positioning and dealer hedging will meaningfully move underlying prices near-term. The $35 AEHR call block (3,900 contracts) will force market‑makers to buy underlying delta on increases in IV/stock, creating upward pressure; the $135 PLTR put block (24,317 contracts) creates the opposite — dealers short stock to hedge, amplifying downside and IV. These are flow-driven, not fundamentals, so liquidity and bid/ask spreads will widen and intraday gamma may produce 5–15% moves around catalyst days.

Risk assessment: Tail risks include misreading sell‑to‑open/complex spreads (position could be synthetic or a hedge), a sudden unwind of retail flow, or a regulatory/halting event that pins strikes. Immediate (days): gamma-driven volatility and price pinning; short-term (weeks–months): IV repricing and mean reversion as hedges unwind; long-term (quarters): fundamentals — AEHR capex cycles, PLTR contract wins — will reassert. Hidden dependency: concentrated retail activity in PLTR can flip from heavy put buying to mass sell-offs when liquidity providers deleverage.

Trade implications: Direct plays should be structured and size‑limited: favor limited‑risk option spreads over naked directional trades. For AEHR, buy-call spreads targeting the $35 area to capture dealer buy pressure; for PLTR, buy put spreads or protective puts to benefit from hedging‑driven downside and higher IV. Pair trades (long AEHR, short PLTR) can neutralize market beta while capturing relative flow. Time entries in tranches over 1–6 weeks and use explicit stop-losses (10–15% adverse move or 50% premium loss on spreads).

Contrarian angles: Consensus treats raw volume as unilateral bullish/bearish signaling, but much could be spread/flow trades; reacting to headline volumes risks crowding. Historically (e.g., large NVDA option blocks), initial directional moves reversed once dealers flattened positions — expect 30–60 day mean reversion risk. Unintended consequence: if many participants buy protection simultaneously, IV can spike then collapse, making late buyers pay rich premia; optimal entry is staged and skew-aware.

Key Decisions for Investors

• Establish a defined‑risk long AEHR position: allocate 1–2% of portfolio to a Feb‑20‑2026 30/40 call debit spread (buy 30, sell 40) to capture upside from dealer delta purchases; target 2.5–3x return, cut losses if spread value falls 50% within 60 days.
• Establish a defined‑risk bearish PLTR hedge: allocate 1–2% of portfolio to a Feb‑13‑2026 135/115 put debit spread (buy 135, sell 115) to monetize downside and IV; take profits on 50% of position if PLTR falls ≥15% or IV rises >30% from current level, exit if underlying rallies >15%.