diff --git a/content/docs/command-reference/add.md b/content/docs/command-reference/add.md
index 8ffeb47ef3..1d0ef04ad9 100644
--- a/content/docs/command-reference/add.md
+++ b/content/docs/command-reference/add.md
@@ -151,6 +151,11 @@ not.
   > Note that external outputs typically require an external cache setup. See
   > link above for more details.
 
+- `-o <path>`, `--out <path>` - destination `path` to make a local target copy,
+  or to [transfer](#example-transfer-to-cache) an external target into the cache
+  (and link to workspace). Note that this can be combined with `--to-remote` to
+  avoid storing the data locally, while still adding it to the project.
+
 - `--to-remote` - import an external target, but don't move it into the
   workspace, nor cache it. [Transfer it](#example-transfer-to-remote-storage) it
   directly to remote storage (the default one, unless `-r` is specified)
@@ -160,9 +165,6 @@ not.
   [remote storage](/doc/command-reference/remote) to transfer external target to
   (can only be used with `--to-remote`).
 
-- `-o <path>`, `--out <path>` - destination `path` for the transferred data (can
-  only be used with `--to-remote`).
-
 - `--desc <text>` - user description of the data (optional). This doesn't affect
   any DVC operations.
 
@@ -332,6 +334,52 @@ $ tree .dvc/cache
 Only the hash values of the `dir/` directory (with `.dir` file extension) and
 `file2` have been cached.
 
+## Example: Transfer to the cache
+
+When you have a large dataset in an external location, you may want to add it to
+the <abbr>project</abbr> without having to copy it into the workspace. Maybe
+your local disk doesn't have enough space, but you have setup an
+[external cache](/doc/use-cases/shared-development-server#configure-the-external-shared-cache)
+that could handle it.
+
+The `--out` option lets you add external paths in a way that they are
+<abbr>cached</abbr> first, and then
+[linked](/doc/user-guide/large-dataset-optimization#file-link-types-for-the-dvc-cache)
+to a given path inside the <abbr>workspace<abbr>. Let's initialize an example
+DVC project to try this:
+
+```dvc
+$ mkdir example # workspace
+$ cd example
+$ git init
+$ dvc init
+```
+
+Now we can add a `data.xml` file via HTTP for example, putting it a local path
+in our project:
+
+```dvc
+$ dvc add https://data.dvc.org/get-started/data.xml -o data.xml
+
+$ ls
+data.xml data.xml.dvc
+```
+
+The resulting `.dvc` file will save the provided local `path` as if the data was
+already in the workspace, while the `md5` hash points to the copy of the data
+that has now been transferred to the <abbr>cache</abbr>. Let's check the
+contents of `data.xml.dvc` in this case:
+
+```yaml
+outs:
+  - md5: a304afb96060aad90176268345e10355
+    nfiles: 1
+    path: data.xml
+```
+
+> For a similar operation that actually keeps a connection to the data source,
+> please see `dvc import-url`.
+
 ## Example: Transfer to remote storage
 
 When you have a large dataset in an external location, you may want to track it