To The Moon

Today, I continued with my Palantir (PLTR) options strategy by selling a covered call on my existing position. My average cost for the PLTR shares stands at around $58.80 after factoring in previous trades and covered call premiums. Currently, PLTR is trading at approximately $59.40.

In this setup, I sold a covered call with a $60 strike price, expiring on November 15th, for a premium of $1.07. This means I collected $107 for the 1 lot (100 shares) covered call position. I then placed an order to buy back the call at $0.60, aiming to secure a profit if the call option price drops to that level.

Here’s my risk and reward analysis:

1. Reward Potential: The $1.07 premium represents an immediate income from the covered call, regardless of whether it expires in or out of the money. If I manage to buy it back at $0.60, my net profit on this trade will be $0.47 per share, or $47 for the lot. Additionally, if PLTR remains below $60 by expiration, I retain the full premium and keep my shares.

2. Risk Exposure: My risk here lies in the potential for PLTR to rally above $60. If it does, my shares will be called away at $60, capping my gains. Given my cost basis of $58.80, selling at $60 still yields a $1.20 profit per share, plus the $1.07 premium, resulting in a total gain of $2.27 per share or $227 for the lot.

This covered call approach provides a balance of income and risk mitigation while leveraging PLTR’s recent price movements.

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