An income idea for Palantir shareholders

Palantir Technologies has been one of the standout performers in the AI space, with its stock price more than doubling this year on the back of growing demand for its AI-driven software and an expanding list of government contracts. The company will report its Q2 earnings on Monday, 4 August, a date that could bring heightened volatility as investors react to the results.

For long-term shareholders who already own at least 100 shares, this period of elevated uncertainty can also mean richer option premiums. Some investors use this as an opportunity to generate additional income from their existing holdings by selling a call option against their shares – a strategy known as a covered call.

What is the idea?

Selling a call option on stock you already own means you receive a premium upfront. In exchange, you agree to sell your shares at a fixed price (the strike price) if the stock rises above that level by the option’s expiry date.

This approach can be attractive when the stock has already rallied significantly and you are comfortable selling at a higher price. If the stock stays below the strike price, you simply keep the shares and the premium. Important note: The strategies and examples described are purely for educational purposes. They assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor must conduct their own due diligence, considering their financial situation, risk tolerance, and investment objectives before making decisions. Remember, investing in the stock market carries risks, so make informed decisions.

Today’s example set-up

• PLTR stock price: around USD 158 (as of 31 July close)
• Sell a 8 August 2025 call option with a USD 180 strike
• Premium received: roughly USD 2.33 per share, or USD 233 for 100 shares

This premium represents about 1.5% of the current stock value in just one week. If PLTR stays below USD 180, you keep both your shares and the premium. If PLTR rises above USD 180, your shares would be sold at that price, giving you an effective sale price of USD 182.33 (strike price plus premium received).

What are the possible outcomes?

1. Stock stays below USD 180: You keep the shares and the USD 233 premium.
2. Stock rises above USD 180: Your shares are sold at USD 180, but you effectively receive USD 182.33 thanks to the premium. This is about 15% above the current price.
3. Stock falls: You still keep the USD 233 premium, which helps offset part of the decline, but you remain exposed to the stock’s downside risk.

Why this strike and expiry?

The USD 180 strike sits just above recent analyst price targets, and the short one-week expiry captures the elevated option premiums ahead of earnings. The option’s delta of around 0.20 means there is roughly a one-in-five chance of assignment at expiry.

Key risks to keep in mind

• Limited upside. If Palantir’s earnings surprise on the upside and the stock price jumps significantly, you will miss out on gains above the strike price.
• No downside protection. The premium offers only a small cushion. A sharp drop in the share price will still result in a loss on the stock position.
• Assignment risk. If the option is in the money at expiry, your shares will be sold at the strike price. You can buy back the option or roll it to another date, but this may involve additional costs.
• Short time frame. With a one-week expiry, price moves after earnings can quickly lead to assignment or option value changes.

Key considerations

• Upside is capped. If Palantir surprises with exceptionally strong earnings and the stock rallies well above USD 180, you miss out on further gains above that level.
• Potential assignment. If the option expires in the money, your shares will be sold at the strike price. You can choose to buy back the option or roll it to a later date if you wish to stay invested.
• Earnings risk remains. A covered call provides income but does not protect against a sharp drop in the stock price.

The bottom line

This example shows how some investors use periods of elevated volatility to generate additional income from stocks they already hold. By selling a call option on Palantir before earnings, a shareholder can collect premium upfront while still holding the stock – with the trade-off of capping their upside above the strike price.