Sold Long Term Put on Palantir

Do you have time to be at your computer to trade a few hours a day? Your answer might be no. Well, this trade might be an answer for you. This is a long term trade that you can get into and look at once in a while to see how it’s doing.

I just got into this trade, I think it could be a great option for people who don’t have the time to sit at a computer. Before I get into this trade let me tell you that I work on margin. Some of the trades I make I have to be on margin. This is a rule of most broker’s for many option’s trades. However, I like the leverage anyway. If you trade with a margin account you must educate yourself on how margin works.

A few minutes ago I sold a Put on Palantir (PLTR) in my margin account. With the stock at $130 I sold 1 PLTR 12/19/25 $125 Put for a premium of $21.50. My Expiration Date is 6 and a half months away and I received a premium of $2150.

Selling a put option means you are giving someone else the right (but not the obligation) to sell you a stock at a specific price (called the strike price) by a certain date (the expiration date). In return, you receive a premium (a cash payment). If the buyer of the Put exercises his right to sell the Put seller the shares of stock the Put seller is obligated to buy the stock.

Sell to Open 1 PLTR 12/19/25 $125.00 P @ $21.50 (+$2150)

I entered this trade for the $2150 premium, however, the Put contract says I have the obligation to buy 100 shares of Palantir at $125 per share. I will have this obligation until the Expiration Date of December 19th or I get out of the contract with a Buy to Close.

I entered this trade because I feel Palantir will be above my Strike Price of $125 on Expiration Day and the owner of the stock will not sell it to me at $125 and this contract will expire–I will keep the $2150 premium and not have the stock put to me. I feel Palantir will be much higher than $125.

Most Main Street beats Wall Street readers know I am very interested in my Return on Investment (ROI). Let’s take a look at my investment. The truth is I am not making an investment to make this trade and bring in the premium of $2150. However, since I am obligated to buy the stock if it is put to me my broker makes me keep the money available in the case the stock is put to me. The 100 shares of Palantir at $125 is $12,500. Keeping this money available means I cannot trade with this money until the expiration of the contract. My “Options Buying Power” is reduced by $12,500. If you look at this $12,500 as an investment because it is locked up, your return on Investment (ROI) would be 17.2 % for the 6 and a half month trade. If you annualize this trade the ROI would be in the area of 34%.

Since I work on margin let’s take a look at how this trade affected my account. When I made this trade my “Options Buying Power” was reduced by only about $400. This is because I work on margin and because the $2150 premium went into my account. When working on margin your broker lends you money to make the trade at a very low interest. I look at this as a business expense. The bottom line is if you look at this $400 as my investment (remember there is no investment when selling Puts) because I cannot trade with this money, my return ($2150) on my investment ($400) is 537% for the 6 and a half month trade. If I annualize this percentage it’s in the area of 1074%.

I love the stock Palantir! The way I look at this trade–the worst thing that can happen is I buy 100 shares of Palantir at $125 per share.

I will be writing more about selling Puts. It’s important to know how Time Decay works in your favor and how you can exit the trade with a Buy to close. I entered this trade with the stock at $130 and as I write the stock is up to $132.50. I could exit this trade right now for a profit of $100.

This trade is a great way to bring in cash when you don’t have time to watch the market all day. I feel it’s a great trade even for someone who sits at their computer all day!

If you have any questions send me an email.

Remember, I am starting a live stock options class this week, Thursday at 6:30pm. If you live on Staten Island, or near, all are welcome. Only for attendance, there is no streaming. If interested send me an email.

 

Successful trading,

Steve

The Options Coach