5 Common Mistakes TSLA Investors Make with Covered Calls — and How to Avoid Them

Tesla doesn't move like other stocks. Your covered call strategy shouldn't either.

Covered calls seem like free money. You collect premium, keep your shares, and wait. What could go wrong?

A lot, actually. Especially with Tesla.

I've talked to hundreds of concentrated TSLA holders over the past few years. Many of them tried covered calls on their own or with an advisor who didn't understand how Tesla moves. The stories are painful. Small premiums collected while massive rallies passed them by. Tax bills they didn't see coming. Entire positions called away during a run they'd waited years for.

Here are the five mistakes I see most often.

Mistake 1: Selling Calls Too Far Out in Time

This is the big one. The mistake that wrecks people.

Most covered call guides tell you to sell 30 to 45 day calls. That works fine for stocks that move 5% in a quarter. Tesla isn't that stock. Tesla moves 5% on a Tuesday.

Here's what happens. You sell a monthly call on Tesla at a strike that feels safe. Nice premium. Tesla starts running. Not a one-day pop, but a sustained rally that lasts weeks. Your shares get called away at the end of the month. Fine, you think. I'll sell another call. So you buy back in (or roll), sell another monthly call, and Tesla keeps running. Your shares get called away again. And again.

Three months later, Tesla is up 60%. You collected maybe 5% in total premium across those three months. That's not income. That's a consolation prize.

The fix: Shorter-duration calls give you more room to react. When Tesla starts moving, you're not locked into a position for 30 more days. You can adjust. Reassess. Let your shares breathe. The per-contract premium is smaller, but the flexibility is worth far more than a few extra dollars.

Mistake 2: Covering Your Entire Position

I get it. If covered calls generate income, wouldn't you want to generate income on every share you own?

No.

Tesla gaps. It doesn't give you warning. An earnings beat, an FSD update, a surprise product announcement, and the stock moves 15% overnight. If every single share is covered, you cap your upside on all of them. There's no part of your position that gets to participate in the move you've been holding for.

Think about what that means psychologically. You've held Tesla through 50% drawdowns. You believed when nobody else did. And then the moment your thesis plays out, you can't benefit because you sold calls on everything.

The fix: Keep a portion of your position uncovered. Always. The percentage depends on your situation, but the principle doesn't change. You need shares that can run when Tesla runs. Covered calls should be a tool you use on part of your position, not a blanket you throw over the whole thing.

Mistake 3: Ignoring the Tax Consequences

This is the one nobody talks about until it's too late.

If you've held Tesla for years and your cost basis is in the low double digits (or even single digits), getting your shares called away isn't just an options event. It's a taxable event. A big one.

Say you bought Tesla at $25 pre-split equivalent and your shares get called away at $350. You collected $8 in premium. Congratulations. You now owe capital gains tax on $325 of gain per share. For someone with a large concentrated position, that tax bill can be six figures. On shares you didn't even want to sell.

I've seen people collect a few thousand in premium and trigger tens of thousands in taxes. The math doesn't work.

The fix: Strike selection has to account for your cost basis and tax situation. This isn't something you figure out from a YouTube video. You need to know your specific numbers, your holding period, your bracket, and your state tax exposure. The "best premium" isn't the one that pays you the most per contract. It's the one that makes sense after taxes.

Mistake 4: Using a Generic Strategy for a Non-Generic Stock

Most covered call education is built around boring stocks. The kind that move 2% a month and pay a dividend. The Wheel Strategy. 30-delta monthlies. These approaches were designed for companies like Coca-Cola.

Tesla's implied volatility regularly sits two to three times higher than the average large-cap stock. That means the premiums are fatter, which makes it feel like you're getting a better deal. But it also means the stock can (and does) move further and faster than whatever "safe" strike you picked.

I've talked to investors who read a Tastytrade guide, applied it to Tesla, and lost their entire position inside of a quarter. They didn't do anything wrong by the textbook. But the textbook wasn't written for a stock that can double in four months.

The fix: Tesla requires a Tesla-specific approach. That means understanding how implied volatility behaves around earnings, around product events, around Elon's social media activity. It means knowing that the standard playbook doesn't work when the stock moves in ways most stocks never will. You don't need to reinvent options theory. But you do need to adapt it.

Mistake 5: Going It Alone Without Understanding the Full Picture

Covered calls are simple to execute. Open your brokerage app, tap a few buttons, collect premium. Done.

But "simple to execute" isn't the same as "simple to do well." The execution is the easy part. The strategy behind it is where people get hurt.

What strike do you pick? How many shares do you cover? What do you do if the stock moves against you? What about earnings week? What if you need to roll? What about the tax implications of short-term vs. long-term treatment on the premium? What happens to your holding period on the underlying shares?

Most Tesla investors I talk to tried covered calls, got burned once or twice, and stopped. Not because covered calls don't work, but because they didn't have a framework for when and how to use them with a stock like Tesla.

The fix: Get help from someone who does this every day, specifically for Tesla. Not a general financial advisor who googled "covered call strategy" before your meeting. Someone who understands the stock, understands the community, and understands why you hold. There's a difference between an advisor who respects your conviction and one who's trying to talk you out of it.

The Bigger Point

Covered calls aren't bad. They're one of the best tools available to concentrated stock holders. But a tool used poorly is worse than no tool at all.

Tesla's volatility is a resource. It generates option premium that most stocks can't touch. The question is whether you're capturing that resource intelligently or giving away your upside for a fraction of what it's worth.

If you're a Tesla investor sitting on a significant position and you've been doing covered calls on your own (or thinking about starting), take a hard look at these five mistakes. Odds are you're making at least one of them. Most people are.

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About Rebellionaire

Rebellionaire is a fiduciary financial advisory firm (a brand of Halter Ferguson Financial, based in Carmel, Indiana) that specializes in concentrated Tesla investors. We help clients optimize their TSLA positions through covered calls, LEAPs, and tactical trimming and adding. We serve clients nationwide.

This post is for educational purposes only and is not personalized financial advice. Covered calls involve risks including the possibility of having shares called away, triggering taxable events, and limiting upside participation. Everyone's tax situation, cost basis, risk tolerance, and goals are different. Options trading is not suitable for all investors. Consult with a qualified financial advisor and tax professional before implementing any options strategy.

Bradford Ferguson is a financial advisor and co-founder of Rebellionaire. For more on Tesla investor strategy, subscribe to the Rebellionaire YouTube channel: youtube.com/@rebellionair3