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The wheel on Palantir: big premiums, big moves, and the sizing problem

Palantir's options pay large premiums because the stock makes large moves, up and down. For a wheel seller, that cuts both ways: a fall can leave you holding shares far below your strike, and a fast rebound can call them away before you've recovered. Here's a made-up cycle where both happen.

Options guide · 9-minute read · Updated 2026-10-27

What Palantir is like for a wheel seller

Palantir Technologies (PLTR) sells data and software platforms to governments and companies. It joined the S&P 500 in 2024. For the wheel strategy, what stands out:

• High Implied volatility. The stock has made very large moves in both directions, and its options are priced for more.
• No dividend. Nothing arrives while you hold assigned shares.
• Earnings gaps. Quarterly reports can move it sharply overnight.
• Heavy retail interest and busy options. Spreads are usually workable at common strikes; check yours.
• A share price that has climbed a long way in recent years, so one contract ties up far more than it did when the stock was a small-account favourite. Check today's price.

Nothing on this page is a recommendation. Palantir is here because people search for it, and because it shows what high volatility does to every step of the wheel.

The sizing problem

On a high-IV stock, the question isn't just "can I afford 100 shares?" It's "can I afford what a normal bad month does to 100 shares?"

Say a hypothetical account holds $30,000 and caps any one stock at 20%, or $6,000. A $135 put ties up $13,500. The sizing rule gives zero contracts. Stretching the cap to fit means one stock carries 45% of the account, on a name known for big swings. Sizing math, the full obligation rule has the formula.

Account note: in Canada, covered calls are widely allowed in a TFSA or RRSP, while cash-secured puts depend on the broker. Options permissions differ by broker, so check yours.

A cycle that loses twice (an illustration, not a trade idea)

These numbers belong to a made-up high-volatility software stock, XYZ. They are not Palantir's prices. Assume you stretched the cap and sold one contract in that $30,000 account.

Step 1: the put. XYZ trades at $150. You sell a 30-day $135 put for $6.00 and collect $600. Your broker sets aside $13,500.

Step 2: the fall. A sector sell-off and a soft report knock XYZ down about a third. It closes expiry day at $100. You're assigned at $135. Running cost: $129.

Step 3: the call. A $135 call at this point pays about $0.50, which feels like nothing. So you sell a 30-day $110 call for $3.00 and collect $300. That strike is $25 below what you paid.

Step 4: the snap-back. XYZ rallies hard and ends the month at $160. Your shares are called away at $110.

Why this happens on high-IV stocks

The wheel works best when a stock drifts. A stock that swings hard puts you on the wrong side twice:

1. On the way down, the put's premium is small next to the fall. A $6 premium on a $35 drop covers less than a fifth.
2. On the way back up, calls above your cost pay little, so it's tempting to sell lower. Then a fast rebound calls you away at a loss. The strike-below-cost trap covers this in detail.

Each row counts the $600 put premium plus that row's call premium. No row wins in both columns. On a stock that can swing this far in a few weeks, you're choosing which surprise you'd rather have.

The rule for next time

1. Let the sizing rule say no. If one contract breaks your cap, the answer is zero, however good the premium looks.
2. Test against a big drop. On a high-IV stock, check the loss at −40%, not just −20%.
3. Decide your call rule before assignment. Will you sell below your cost? Write it down while you're calm.
4. Keep high-IV names a small slice of the book. High-IV vs low-IV stocks for selling compares the two.
5. Check earnings first. A report inside the expiry is a big part of that premium.

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