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Palo Alto into earnings: getting premiums using cash secured puts
Palo Alto Networks, Inc. (NASDAQ: PANW) is scheduled to report earnings on 1 September 2026. The shares were recently trading at USD 370.85, and options markets are reflecting elevated volatility ahead of the announcement, with implied volatility around 60.23%. Investor continues to focus on AI-driven cybersecurity demand, platform adoption, and growth expectations within the cybersecurity sector ahead of earnings.
For the upcoming quarter, analyst expectations indicate approximately USD 3.35 billion to USD 3.40 billion of revenue and roughly USD 0.98 EPS.
What is a Cash-Secured Put?
A cash-secured put is an options strategy where you sell a put option and receive a premium upfront.
In return, you accept the obligation to buy 100 shares at the strike price if the option holder chooses to exercise the contract or if the option finishes in the money at expiry.
The strategy is called "cash-secured" because you set aside enough cash to purchase the shares if assignment occurs. Many investors use this approach when they would like to own a company, but only at a lower price than the current market price.
An example with Palo Alto Networks
Suppose you'd be happy to buy Palo Alto Networks shares, but only if they fell to a lower level than the current market price.
One approach could be selling the:
- 4 September 2026 USD 350 Put
- Premium received: USD 8.40 per share
By selling this put, you would receive approximately:
- USD 840 upfront (USD 8.40 × 100 shares)
If assigned, your effective purchase price becomes:
- USD 341.60 per share
- Calculated as USD 350.00 strike price minus USD 8.40 premium received
This effective cost basis is also the break-even price for the position at expiry.
How Could This Play Out?
At option expiry | Share price | What happens | Result |
Above strike | Above USD 350 | Put expires worthless | You keep the USD 840 premium. Cash requirement of USD 35,000 is released. |
Slightly below strike | Around USD 345 | Shares are likely assigned at USD 350 | You buy 100 shares for USD 35,000. After the USD 840 premium, your effective cost remains USD 341.60. |
Significantly below strike | Well below USD 350 | Shares are assigned at USD 350 | You buy shares at USD 350 despite the lower market price. Premium cushions part of the decline, but losses can occur below the break-even price of USD 341.60. |
Two Additional Scenarios
Ahead of earnings, options markets are implying approximately an 8% move in Palo Alto Networks shares. With the stock trading around USD 370.85, that translates to a potential move of roughly USD 29.70, resulting in an expected range of approximately USD 341 to USD 401 after earnings.
Depending on your objective, you may choose between generating more premium income or targeting a lower potential entry price.
Scenario 1: Higher Premium Income with the USD 365 Put
Investors who are comfortable owning Palo Alto Networks closer to the current market price may consider selling the:
- 4 September 2026 USD 365 Put
- Premium received: USD 13.94 per share
- Delta: -0.41
This would generate approximately:
- USD 1,394 upfront (USD 13.94 × 100 shares)
Effective purchase price if assigned:
- USD 351.06 per share
- Calculated as USD 365.00 minus the USD 13.94 premium received
This approach generates a larger upfront premium but carries a higher likelihood of assignment if the stock falls after earnings.
Scenario 2: A More Conservative Alternative
Investors seeking a wider margin of safety may prefer selling the:
- 4 September 2026 USD 340 Put
- Premium received: USD 5.10 per share
- Delta: -0.17
This would generate approximately:
- USD 510 upfront (USD 5.10 × 100 shares)
Effective purchase price if assigned:
- USD 334.90 per share
- Calculated as USD 340.00 minus the USD 5.10 premium received
Notably, the USD 340 strike sits close to the lower end of the market's implied earnings range. As a result, investors choosing this strike receive less premium but gain a lower potential entry price and a lower probability of assignment.
What Are The Risks?
Beyond the normal risks of selling puts, investors should consider company-specific factors that have recently been attracting attention.
Recent market coverage has focused on whether Palo Alto Networks can continue delivering strong growth in AI-enabled cybersecurity products, sustain subscription momentum, and justify elevated valuation expectations after a strong share-price run. Analysts have also been closely monitoring future revenue growth guidance and execution against long-term platform adoption targets.
For a cash-secured put seller, the main risk is that earnings disappoint and the share price declines sharply. Although the premium received reduces the effective purchase price, it does not eliminate downside risk.
Other risks include:
- Assignment of shares after a significant post-earnings decline.
- Large price swings caused by elevated earnings volatility.
- Opportunity cost from having cash tied up as collateral.
- Owning shares during a period when market expectations for growth or profitability change materially.
Key Definitions
Strike Price
The agreed price at which shares may be purchased if assignment occurs.
Premium
The amount received upfront for selling the option.
Assignment
The process by which the put seller is required to buy the underlying shares.
Expiry
The date when the option contract ceases to exist if not exercised.
Break-Even Price
The effective share cost after subtracting the premium received from the strike price.
Cash-Secured
A position backed by enough cash to purchase the shares if assignment occurs.
Delta
An option sensitivity measure showing how much the option price may change relative to a USD 1 move in the underlying share price.
Implied Volatility
The market's estimate of future price movement, often elevated before earnings announcements.