A short-term dip, and a patient approach

Last Friday, Palantir’s share price dropped sharply—falling from nearly USD 145 to just under USD 130. The cause? Not bad news from the company itself, but something more mechanical: some of the big investment funds that automatically follow stock market indexes had to adjust their holdings. This happens regularly and can push share prices up or down—not because of how a company is performing, but simply because it was added to or removed from one of those indexes.

If you’re a long-term investor, this kind of drop can feel frustrating. But it can also offer opportunity.

Rather than jumping in too early or guessing the bottom, you can take a more deliberate approach. A cash-secured put lets you earn income today while offering to buy shares at a discount later.

What is a cash-secured put?

A cash-secured put is a trade where:

• You agree to buy 100 shares of a stock at a set strike price (here: USD 125)
• You choose a date when the agreement ends (called the expiry date, here: 18 July 2025)
• You receive a cash payment (called the premium) for making that offer
• You keep enough cash in your account to pay for the shares if the stock falls

This strategy is often compared to placing a limit order—but with one big difference: a limit order doesn’t pay you. A cash-secured put does.

The trade setup on Palantir

As of 30 June, Palantir’s share price was around USD 137.35.

Here’s what the trade looks like:

• You agree to buy 100 shares at USD 125
• You receive about USD 2.15 per share, or USD 215 in total
• You must keep USD 12 500 (USD 125 × 100) in cash to fund the possible purchase

If you are not assigned the shares, you simply keep the USD 215 income.

That means your “worst-case entry” is USD 125. But your real cost is lower—because of the premium you collected. If assigned, your effective purchase price becomes USD 122.85.

Three outcomes by 18 July

On expiry day (Friday 18 July 2025), here’s what can happen:

1. Palantir stays above USD 125
   You’re not assigned. The agreement expires, and you keep the full USD 215 income.
2. Palantir falls to USD 125 or slightly below
   You’re assigned. You now own 100 shares at USD 125, but your effective cost is lower—USD 122.85.
3. Palantir drops well below USD 125
   You still buy the shares at USD 125, which means you’re down on paper at first. But this is no different from buying the stock directly—except you were paid USD 215 to do it.

How much income is that?

USD 215 in premium on a USD 12 500 investment is a return of 1.72 % over 18 days. If you could repeat a similar trade several times a year, your annualised return would be over 35 %—though, of course, actual results will vary.

What matters here is that your cash is no longer idle. Instead of sitting on the sidelines, it’s earning income while waiting for a better buying opportunity.

What if you do buy the shares?

If Palantir drops and you’re assigned the shares, that’s not a bad outcome—it’s the one you planned for.

You now own a company you liked anyway, but at a lower price. From here, you can:

• Hold the shares as a long-term investment
• Or use a covered call to generate more income (we’ll explain that in a separate article)

Final thoughts

Cash-secured puts are a way to stay patient without missing out. You offer to buy a stock you believe in—but only at a price you’ve chosen. And you’re paid for making that offer.

It’s a slower, steadier way to build a position. You’re not chasing the price. You’re setting your terms—and earning income while you wait.