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Maximize Your Income with Covered Calls and Cash-Secured Puts on Palantir Stock

Discover how to earn extra income and buy stocks at a discount using advanced options strategies on Palantir Technologies.

Description: Learn the ins and outs of covered calls and cash-secured puts, and how you can apply these strategies to Palantir stock to generate additional income or acquire shares at a lower price. This guide is perfect for investors of all levels, from beginners to seasoned traders, and includes relatable examples for an Indian audience.

Introduction

Are you looking to make your investments work harder for you? Do you want to earn extra income or buy your favorite stocks at a discount? If so, options trading might be the key. In this comprehensive guide, we’ll explore two popular options strategies—covered calls and cash-secured puts—specifically applied to Palantir Technologies a leading data analytics company known for its AI-driven solutions.

Whether you’re a student in Delhi exploring the stock market or a professional in Bangalore managing a portfolio, these strategies can help you maximize returns while managing risk. We’ll break down each strategy in simple terms, provide examples tailored to Indian investors, and offer actionable steps to get started. Let’s dive in!

What Are Options?

Before we explore the strategies, let’s understand options. Options are financial contracts that give the buyer the right, but not the obligation, to buy or sell a stock at a set price (strike price) within a specific time.

• Call Option: Gives the buyer the right to buy the stock at the strike price.
• Put Option: Gives the buyer the right to sell the stock at the strike price.

When you sell options, you collect a premium (payment) from the buyer, but you take on obligations if the option is exercised. Covered calls and cash-secured puts are two beginner-friendly strategies that use options to generate income or buy stocks strategically.

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Covered Calls Explained

A covered call is a strategy where you sell call options on a stock you already own. You earn a premium, which is yours to keep regardless of what happens. If the stock price rises above the strike price, the buyer may exercise the option, and you’ll sell your stock at the strike price. If the price stays below the strike price, the option expires worthless, and you keep both the premium and your stock.

Imagine you own 100 shares of Palantir at $132.80 per share (current price as of June 2025, per You sell a call option with a strike price of $140, expiring in one month, for a premium of $2 per share ($200 total for 100 shares).

• Scenario 1: If stays below $140, the option expires, and you keep the $200 premium and your shares.
• Scenario 2: If rises to $145, you sell your shares at $140, earning a profit of $7.20 per share ($140 - $132.80 + $2 = $720 total).

Pros and Cons

Aspect	Pros	Cons
Income	Generates extra income from premiums.	Limits gains if the stock price surges.
Cost Basis	Reduces the effective cost of owning the stock.	You may have to sell your stock if exercised.
Risk	Lower risk compared to other options strategies.	Still exposed to stock price declines.

Visual Suggestion: Include a flowchart showing the covered call process with Palantir as the example.

A cash-secured put involves selling put options on a stock while setting aside enough cash to buy the stock if the option is exercised. You earn a premium, and if the stock price falls below the strike price, you may buy the stock at that price, effectively at a discount after accounting for the premium.

How It Works with Palantir

Suppose you want to buy but find $132.80 too expensive. You sell a put option with a strike price of $120, expiring in one month, for a premium of $3 per share ($300 total). You need $12,000 (100 shares * $120) in your account to secure the trade.

• Scenario 1: If stays above $120, the option expires, and you keep the $300 premium.
• Scenario 2: If falls to $115, you buy 100 shares at $120, but your effective cost is $117 per share ($120 - $3).

Pros and Cons

Aspect	Pros	Cons
Purchase Price	Allows buying stock at a lower price.	May require buying stock at a falling price.
Income	Generates income from premiums.
Risk	Defined risk, as you’re prepared to buy.	Stock could drop significantly below strike price.

Visual Suggestion: Include a flowchart illustrating the cash-secured put process with Palantir.

Comparing Covered Calls and Cash-Secured Puts

Both strategies generate income through premiums, but they serve different goals:

• Covered Calls: Ideal if you own Palantir stock and are willing to sell at a higher price. Best for a neutral to slightly bullish outlook.
• Cash-Secured Puts: Suitable if you want to buy Palantir at a lower price. Best for a neutral to slightly bearish outlook.

Both have similar risk profiles, but outcomes depend on stock price movements. Covered calls limit upside potential, while cash-secured puts risk buying a declining stock.

Feature	Covered Call	Cash-Secured Put
Ownership	Requires owning the stock.	Requires cash to buy stock.
Goal	Earn income or sell at a higher price.	Earn income or buy at a lower price.
Market Outlook	Neutral to bullish.	Neutral to bearish.
Risk	Capped gains, stock price decline.	Buying at a higher-than-market price.

Palantir Technologies is a compelling choice for options trading due to its unique position in the market:

• Volatility:  stock price has fluctuated significantly, with a 52-week range of $20.82 to $135.27 This volatility increases option premiums, making strategies more lucrative.
• Growth Potential: Palantir’s role in AI and data analytics, coupled with contracts like the $795 million U.S. Army Maven Smart System deal signals strong long-term potential.
• Active Options Market:  has a robust options market, offering flexibility in strike prices and expiration dates 

Visual Suggestion: Include a historical price chart of  to show its volatility.

Real-Life Examples (Indian Context)

To make these strategies relatable, let’s explore two hypothetical Indian investors:

1. Ascending | Ramesh, the Software Engineer from Bangalore:
   Ramesh, a 30-year-old tech professional, owns 100 shares of bought at $120. He sells a covered call with a $140 strike price for a $2 premium. If stays below $140, he keeps the $200 premium. If it rises above, he sells at $140, earning a $2,000 profit plus the premium. This extra income helps Ramesh fund his side hustle in app development.

2. Smita, the Teacher from Mumbai:
   Smita, a 35-year-old schoolteacher, wants to invest in but finds $132.80 too high. She sells a put option with a $120 strike price for a $3 premium, setting aside $12,000. If stays above $120, she keeps the $300 premium. If it falls to $115, she buys at $120, effectively paying $117 per share. This strategy aligns with her goal of building a diversified portfolio for her family’s future.

These examples show how Indian investors can use these strategies to achieve financial goals, whether it’s earning extra income or strategically buying stocks.

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While these strategies can be profitable, they come with risks:

• Covered Calls: You may miss out on significant gains if Palantir’s price surges past the strike price. You’re also exposed to losses if the stock price falls significantly.
• Cash-Secured Puts: You might buy Palantir at the strike price, even if the market price drops lower, leading to potential losses. The cash reserved also limits your liquidity for other investments.

To manage risks:

• Research Thoroughly: Understand Palantir’s market trends and volatility 
• Use Stop-Loss Orders: Set limits to protect against significant price drops.
• Consult Experts: Speak with a financial advisor to align strategies with your goals.

1. Open a Brokerage Account: Use platforms like Interactive Brokers or Zerodha (for international trading) that offer U.S. stock options.
2. Learn Options Basics: Study resources from to understand terms and risks.
3. Analyze Palantir: Review performance and news to choose appropriate strike prices.
4. Start Small: Test strategies with one contract (100 shares) to gain experience.
5. Monitor Positions: Regularly check stock and option prices to adjust strategies as needed.

Downloadable Resource: A checklist for executing covered calls and cash-secured puts, including steps for selecting strike prices and managing risks.

Conclusion

Covered calls and cash-secured puts are powerful tools for generating income and managing your portfolio. By applying these strategies to Palantir Technologies, you can potentially earn extra income or acquire shares at a discount.With Palantir’s volatility and growth potential, these strategies can be particularly rewarding, especially for Indian investors looking to diversify globally.

The stock market is unpredictable, and past performance doesn’t guarantee future results. Always conduct thorough research and consider professional advice before trading.

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