Palantir has recently been on a downward trend after its Q3 results were announced. As a shareholder with 800 Palantir shares, I am losing value in the shares I own. And since Palantir does not pay dividend, I will just have to wait for stock price to rise again before turning unrealised loss to gain.
However, while waiting for the share price to reach its potential, it is still possible to earn some returns through options trading. I did that by selling covered call options on my 800 Palantir shares and capitalising on the high Implied Volatility (IV) of Palantir options to get a decent return in short term.
If the stock price continues to fall, the premium drops in value and I will buy back the options to close the contract. Here is a recent covered call example that I bought:
Opening the Contract
Type of Option: Covered Call
Sold On: 17 Nov 21 (Wed)
Expiration Date: 26 Nov 21 (9 Days to Expiration)
Strike Price: $23.5
Share price when the contract was sold: $22.70
Premium received: $34 per contract (1.2%)
Closing the Contract
Type of Option: Covered Call
Bought to Close Contract On: 22 Nov 21 (5 days later)
Share price when the contract was bought: $20.30
Premium paid: $8 per contract
Nett profit: $34 – $8 = $24 per contract
Total Returns: 1.1% over 5 days
I decided to go for weekly options instead of my favourite monthly options because the price is too volatile. It can spike up suddenly which means I may lose all the shares that I hope to keep for the long term by having to sell them when the call option expires in the money. By selling weekly call options, I can pick a strike price that I think is not likely to be reached in a week’s time. Thus, I can still collect some returns while I wait for the share price to rise and manage the risk of not losing my shares.
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