Investment Reflection on Palantir Cash-Secured Put Option
I recently sold one contract of Palantir cash-secured put option with a strike price of USD20 and a maturity date of 21 June 2024 for USD71. This investment decision is based on my analysis of Palantir's strong performance and potential future growth, particularly in light of its recent partnership with Oracle.
Analysis of Palantir's Financial Performance
Palantir's $Palantir Technologies Inc.(PLTR)$
Moreover, Palantir's transformation from negative to positive EBIT from 2022 to 2023 reflects a shift towards profitability. This turnaround is a testament to the company's operational efficiency and strategic focus on cost management.
The most striking aspect of Palantir's financial performance is its free cash flow (FCF) growth. The FCF more than doubled from Q3 to Q4 in 2023, rising from $131.88 million to $296.31 million. This significant increase in FCF highlights Palantir's ability to generate cash from its operations, which could be a strong indicator of future investment opportunities and potential returns.
Impact of Palantir's Partnership with Oracle
Palantir's recent partnership with Oracle is a significant development for the company. This collaboration aims to enhance businesses and governments through AI and cloud-based solutions, leveraging Oracle's vast market presence and expertise. This partnership will likely expand Palantir's customer base and strengthen its market position, ultimately contributing to the company's long-term growth.
Investment Decision and Potential Outcomes
By selling the cash-secured put option with a strike price of USD20, I am essentially betting that Palantir's stock will not fall below that price by the maturity date of 21 June 2024. If the stock remains above USD20 at maturity, the option will expire worthless, allowing me to keep the premium of USD71 without any further obligation.
Given Palantir's strong financials and recent partnership with Oracle, I believe the company's stock will continue to perform well. This view supports my decision to sell the put option, as the likelihood of the stock price falling below USD20 seems relatively low.
Conclusion
In a nutshell, my decision to sell the Palantir cash-secured put option reflects my confidence in the company's solid financials and its strategic partnership with Oracle. These factors, along with the impressive growth trajectory of Palantir's stock, suggest that the option's strike price of USD20 is an achievable threshold. This investment strategy offers the potential for a return through the option premium while minimizing the risk of having to purchase shares at a lower-than-expected price.
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