Collect Income from This Soaring Big Data Stock

Big Data company Palantir (PLTR) continues its pre-Thanksgiving rally with calls almost twice as prevalent as puts, but we're seeing quite a bit of fading volume as prices go higher.

This looks like a fade to support and then a re-engaging of buyers, which leaves us sitting in a wide range into its next earnings cycle. That means it's the perfect time for some income generation trades – selling option premium and allowing prices to move in a range while we collect time value.

For this reason, I'd like to set up the short iron condor expiring in February, 2025. Earnings are slated for Feb 3, 2025, presenting a time where we might need to reassess risk as we draw closer to expiration.

The short iron condor is a combination of a short call spread and a short put spread. In this case, we're looking at:

• Sell to open 1 PLTR 21 Feb 95 calls
• Buy to open 1 PLTR 21 Feb 100 calls
• Buy to open 1 PLTR 21 Feb 55 puts
• Sell to open 1 PLTR 21 Feb 50 puts

The total potential profit what we collect on the credit side which is $1.56 at this writing and the total risk is difference between the distance of the strikes and the credit collected ($5 – $1.56= $3.44).

The reason why we're using a short iron condor when the risk is so much higher than the reward is simply a matter of probabilities. The probability the prices move into our short strikes is currently 8% while the probability that we hold outside this region is 92%.

The relative resistance zone is likely the round number of $100 where a fair number of headwinds should hit this chart in the short term. The relative support is near $55.

The strategy result provides only two choices to exit the trade:

1. To buy back the short iron condor when it is performing at your target parameters – I like the 50% profit range.
2. To buy back the short iron condor when it hits either of the short strikes and stays outside of the iron condor profit space, or hits the loss threshold that is desirable for you. Again, I like the 50% stop here.

Be patient with these kinds of trades. The goal is a slow burn as it shifts into a slight area of consolidation.

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