PLTR Covered Calls

Covered calls can generate extra income from stocks you already own. By selling a call, investors collect a premium upfront in exchange for giving up some upside if the stock rises above the strike price.

Here, we build a systematic covered call strategy using Palantir Technologies (PLTR). Rather than selling calls continuously, we use a price-strength filter based on PLTR's 52-week high. Trading near a 52-week high can signal strong momentum and investor demand. Instead of trying to predict whether the rally will continue or slow, investors can exchange some potential upside for option income while continuing to hold the stock.

Our strategy is straightforward. Whenever PLTR is within 10% of its 52-week high, we sell an at-the-money call approximately 30 days from expiration. At-the-money calls generally provide more premium than further out-of-the-money calls but place a tighter cap on gains if PLTR continues higher. The premium also provides a modest cushion against declines, although most of the stock's downside risk remains.

Over the past three years, each covered call is held through the defined holding period before PLTR is evaluated again. If the stock remains within 10% of its 52-week high, another approximately 30-day at-the-money call is sold. Otherwise, the strategy continues holding PLTR without selling a new call until the condition is met again.

From August 8, 2023, through August 7, 2026, the strategy generated a 324.3% total return, equivalent to a 62.3% CAGR. Risk-adjusted performance was also strong, with an annualized Sharpe ratio of 1.12 and a Sortino ratio of 1.70, while 57.5% of trading days were profitable.