Why Palantir is back in focus after earnings

Palantir Technologies reported quarterly results after the U.S. market close, with revenue and earnings coming in ahead of expectations and management issuing constructive guidance for the year ahead. The immediate market response was strong.

When regular trading opened the next day, the stock jumped into the mid-160s, well above its pre-earnings close in the high-140s. As the day progressed, some of that enthusiasm faded. By late afternoon U.S. time, the share price had pulled back toward the mid-150s.

For long-term investors, this sequence is familiar. Earnings can reprice a company very quickly, but the first post-earnings price is not always the level where the market eventually settles.

Why option premiums often stay high after earnings

Options are priced based on how much movement the market expects over the life of the contract. This expectation is known as implied volatility.

Even after earnings are released, implied volatility does not always drop immediately. When a stock has just made a large move and investors are still uncertain about what comes next, options can continue to reflect that uncertainty through higher premiums.

In Palantir’s case, the sharp gap higher followed by a pullback meant that put options were still offering relatively elevated premiums several hours into the trading session. This makes it a useful example for explaining how options can sometimes be used alongside a long-term investment approach.

What is a cash-secured put, in plain terms?

A cash-secured put is an options structure where an investor sells a put option and sets aside enough cash to buy the shares if required. One contract typically represents 100 shares.

In practical terms, it combines two ideas:

• The investor is willing to buy shares, but only at a lower, predefined price.
• The investor receives a premium upfront as compensation for making that commitment.

If the share price stays above the agreed price until the option expires, the option expires and the premium is kept. If the share price falls below that level, the investor may be required to buy the shares at the agreed price.

Important note: The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it's crucial to make informed decisions.

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A Palantir case study: the 150 put

The screenshots accompanying this article show Palantir’s option prices roughly four and a half hours after the market opened following earnings. At that time, the shares were trading in the mid-150s.

One example from the options chain is a put option with a strike price of 150. At the time of the snapshot, this option was priced at about 4.40 per share, or roughly 440 USD per contract. Open interest at this level was relatively high, suggesting that many market participants were focused on this price area.

This structure defines three key numbers:

• Commitment: an obligation to buy 100 shares at 150 USD if assigned.
• Premium received: about 440 USD upfront.
• Effective entry price if assigned: approximately 145.60 USD (150 minus the premium received).

These figures describe how the structure worked based on prices at that moment. They are not forecasts.

What does the premium mean in return terms?

Many investors naturally ask what this premium represents in terms of return.

In this example, the investor receives about 440 USD for committing 15,000 USD (100 shares at 150 USD). If the option expires without assignment, that premium corresponds to roughly 2.9% of the capital committed over the life of the option.

Because the option is short-dated, this return is earned over a relatively brief period rather than a full year. While it can be annualised for comparison purposes, doing so assumes similar opportunities could be repeated under comparable conditions, which is never guaranteed.

A more grounded way to view the premium is as compensation for accepting a specific obligation over a defined timeframe, rather than as a promised yield.

Comparing this with buying shares outright

Buying shares in the mid-150s provides immediate exposure to any rebound, but also full downside risk from that level.

A cash-secured put takes a different approach. Ownership is delayed unless the price falls, and the investor is compensated for waiting. If shares are eventually acquired, they are bought at a lower effective price than the post-earnings market level at the time of the snapshot.

Possible outcomes at expiry

To make the trade-offs clear, it helps to consider three simplified scenarios:

• Shares stay above 150: the option expires, the investor keeps the premium, and no shares are purchased.
• Shares fall below 150: assignment may occur and shares are bought at 150, with the premium reducing the effective cost.
• Shares fall sharply: losses begin below the effective entry level, similar to owning shares from that level.

A simple payoff table or expiry chart can help visualise these outcomes at a glance.

Risks and limitations to understand

While cash-secured puts are often viewed as conservative, they are not risk-free.

• The obligation to buy shares remains even if the stock price falls quickly or sentiment deteriorates.
• If the stock rallies sharply, the investor does not participate beyond the premium received.
• Post-earnings periods can remain volatile, particularly for widely followed stocks.

The strategy also requires discipline. Even if a trading platform does not require the full cash amount upfront, the position should be treated as fully funded.

Why this approach can appeal to long-term investors

For buy-and-hold investors, a cash-secured put can be seen as a structured way to express patience. Instead of waiting passively for a pullback, the investor defines an acceptable entry price and is compensated for that willingness.

For more active investors, the same structure offers a way to engage with post-earnings volatility without chasing price movements.

Final note

This Palantir example is intentionally framed as an educational snapshot. It illustrates how post-earnings volatility can influence option pricing and how some investors think about balancing opportunity, income, and risk.

Market conditions change, and outcomes are never guaranteed. The purpose of this article is to explain the mechanics and trade-offs, not to suggest a specific course of action.

Frequently asked questions

What happens if I am assigned on a cash-secured put?

If assignment occurs, the investor is required to buy 100 shares per contract at the strike price. In this example, that would mean buying Palantir shares at 150 USD. The premium received upfront lowers the effective purchase price, but once the shares are owned, their value will continue to move with the market.

Is a cash-secured put safer than buying shares outright?

It can reduce entry risk by lowering the effective purchase price and by paying a premium upfront. However, it does not eliminate downside risk. If the stock falls significantly below the effective entry level, losses can still occur, similar to owning shares from that level.

Can the option be closed before expiry?

Yes. Options can generally be bought back before expiry. Some investors choose to close a position early if most of the premium has been earned or if market conditions change. Closing early may lock in gains or limit risk, but it depends on prices and liquidity at the time.

Why not just place a limit order instead?

A limit order sets a desired purchase price but does not provide compensation while waiting. A cash-secured put combines a conditional purchase price with premium income, in exchange for taking on an obligation.

Does a cash-secured put always result in owning the shares?

No. If the share price remains above the strike price until expiry, the option expires and no shares are purchased. The outcome depends entirely on how the share price behaves over the life of the option.