Palo Alto Networks Inc (PANW) shares are trading higher today after the company reported better-than-expected results for the fourth quarter. With the tech sector showing signs of cooling I decided to open an In-the-Money Covered Call to possibly keep a larger premium.
Buy 100 Shares PANW @ $184.75
Sell to Open 1 PANW 8/22/25 $182.50 @ $4.25 → Premium collected $425
If PANW goes below $182.50 at expiration
- I keep the $425 premium.
- I keep the stock (at a lower price)
If PANW stays above $182.50 at expiration
- Shares will be called away at $182.50.
- Down $225 on stock sale
- I Keep the $425 premium
- Net profit: $200 on the trade.
I make ITM Covered Call trades like this for the larger upfront premium; this larger premium gives downside protection. ITM Covered Calls work well if you think the market might turn slightly bearish where you want income and don’t mind giving up some upside if the stock moves higher.
Successful trading,
Steve
The Options Coach