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Let’s get one thing straight. I don’t know where the stock market is going next. I never do. Because investing in the stock market has never been about guessing which direction it will go next. That’s why I love horse racing, because I can bet $1 at a time if I want, and I find out quickly if I was “right” or not.
But the stock market is a much more serious endeavor for most of us. As such, guessing is not a great strategy. Unfortunately, so much of what passes for “analysis” these days is really just an overwhelming amount of guessing.
I have always approached investing as a quest to make as much as I can, but without losing very much along the way. That’s why risk management is first, second, and third in my top-3 investing tips for myself. And, why when a stock or exchange-traded fund has flown higher, my first instinct is to protect those gains.
Sure, we can sell a stock that’s up as much as Palantir (PLTR), but that can lead to bigger regrets than holding something that drops 50%. PLTR was trading at $24 a year ago. Now? How about $158 as of Monday morning. What a move!
What Happens Now That Palantir Has Notched Historic Gains?
PLTR has treated investors very well. But it also had a little 50% “dip” along the way to where it is now. That was part of the overall market malaise that ran from February to April. Again, rather than predict the future, I always lean toward more of the weight of the evidence, balancing further growth in the stock price with the risk of a major decline. On that latter point, I refer to a “sustainable” decline, one that doesn’t come right back.
So with that in mind, let’s look at the mighty PLTR, with an eye toward having our cake and eating it too. Because if you rode this one up this far, you probably are not selling it. But you could protect it, while maintaining all or nearly all of your upside potential. Risk management does not have to mean small returns. In fact, it can often lead to higher long-term returns.
PLTR has become a nearly $400 billion dollar market cap stock despite producing less than $500 million in net income in 2024. It is all about future growth expectations. As a technician, I let the market and fundamental analysts grapple with that aspect of the stock’s attractiveness. But it must be said, a “normal” version of this table below would have a price-earnings to growth (PEG) Ratio perhaps one-fifth of what it is, and a forward P/E ratio of maybe one-tenth of PLTR’s 423x. So this ain’t cheap.
PLTR Stock Chart Analysis
The daily view indicates to me a slowing in momentum, but how could it not after this type of rally? But PLTR is now a striking 50% above its 150-day moving average. Again, not cheap. Still, no breakdown yet.
The weekly chart is a parabolic move up… until it isn’t. So much of this rally is based on projections into the future, if owners have an itchy trigger finger, this one could come back down to earth very quickly. Or, if a market “event” occurs. None of this is what I think will happen, because I don’t speculate like that. I will protect myself instead.
How to Collar Palantir
As I’ve noted before here, the best collars are on volatile stocks and ETFs. PLTR is currently running at an implied volatility level of 48%, which is triple that of the broad stock market. Translation: collaring works well.
I’ll also note that its IV Rank is 36%, which means PLTR is not close to its lowest volatility level of the past 12 months. That would be an IV Rank of 1%. So that means its collar-ability is not overvalued to me.
However, the options will still be expensive, given that absolute volatility level. So in my example, I’m giving it some room, with the put option struck at $140, out to 11/21/25, about 4 months from now. For every 100 shares of PLTR owned, it would cost $11.80 a share, or $1,180 to protect the stock below that $140 level.
On the covered call side, this is really where I try to project roughly where I think the stock could go if it continued higher. With PLTR in “uncharted territory,” that’s a tough one. But I know my downside protection is costing me close to $12 a share, so trying to pay for that with a covered call is my goal.
Shown here, there are always a lot of choices. The $190 calls would pay for nearly all of the puts, but that creates a range of $140-$190. The stock is at $158, so $32 upside versus $18 downside is less than 2:1.
I personally do not own PLTR, but if I did, I’d be looking toward that $200-$220 area. That means a higher hurdle rate to get profitable, but more upside.
Because the last thing I’d want to do with a runaway name like this is to cut off a lot of profit potential. Collaring stocks is considered a “defensive” strategy by many. I’m not part of that “many,” as I see it and use it as a way to simply place ongoing guardrails around stocks. Because the stock market is not what it used to be, and heroes can fade in a flash.
On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
