What happens if Tesla goes above the strike price?

If Tesla is above the strike price at expiration, your shares may be called away and sold at the strike price. You keep the option premium, but you give up gains above the strike.

How many Tesla shares do I need to sell a covered call?

One covered call contract is typically covered by 100 shares of Tesla stock. If you own fewer than 100 shares, you generally cannot sell a standard covered call without using a different strategy.

Are weekly or monthly Tesla covered calls better?

Weekly covered calls expire sooner and may require more frequent management. Monthly covered calls usually bring in more premium but tie up shares longer. The better choice depends on your goals, time, and risk tolerance.

Tesla Covered Calls: How They Work, Risks, and Income Potential

Q: What are Tesla covered calls?

Tesla covered calls are call options sold against Tesla shares you already own (typically 100 shares per contract). You collect a premium up front, but your upside is capped if Tesla rises above the strike price.

Q: Can I lose money selling Tesla covered calls?

Yes. The premium you collect provides some cushion, but it does not prevent losses if Tesla stock falls. Your downside risk is largely the same as owning Tesla shares, minus the premium received.

Q: Do Tesla covered calls work in bull markets?

They can, but they often underperform holding shares during strong rallies because upside is capped at the strike price. Covered calls tend to fit best when the stock is moving sideways or rising modestly.

Q: Can I close a Tesla covered call early?

Yes. You can buy back the call option before expiration to close the position. Investors may do this to reduce assignment risk or adjust strikes as Tesla’s price moves.

Q: Are covered calls taxable?

Taxes depend on your country, account type, holding period, and how the option position is closed or assigned. Consider consulting a qualified tax professional for guidance in your situation.

Tesla covered calls are one of the most common options strategies used by investors who already own shares of Tesla and want to generate income without selling their stock outright.

If you’ve ever searched for “Tesla covered calls” or “covered calls on Tesla,” you’re probably trying to answer one basic question: Is there a way to earn income from Tesla stock without fully giving up long-term upside?

Covered calls attempt to do exactly that—by trading some upside potential for option premium. Sometimes this works well. Other times it creates frustration, especially with a stock as volatile as Tesla.

This page walks through how Tesla covered calls work, why investors use them, the risks involved, and when the strategy may (or may not) make sense.

What Is a Covered Call?

A covered call is an options strategy where an investor sells a call option while already owning the underlying stock.

The strategy is considered “covered” because the seller owns the shares. If the call option is exercised, the seller can deliver the stock they already own instead of buying it at market prices.

At a basic level, a covered call involves:

Owning at least 100 shares of a stock
Selling one call option against those shares
Collecting a premium up front
Accepting a capped upside on the stock

If the stock stays below the option’s strike price, the option expires worthless and the investor keeps both the shares and the premium.
If the stock rises above the strike price, the shares may be called away at that price.

What Are Tesla Covered Calls?

Tesla covered calls are simply covered calls sold using Tesla stock as the underlying asset.

Because Tesla is actively traded and highly volatile, its options often carry higher premiums than more stable stocks. This makes Tesla a popular candidate for covered call strategies among retail investors.

When people refer to selling covered calls on Tesla, they are usually talking about:

Owning 100+ shares of Tesla
Selling call options to generate income
Repeating the process over time

Tesla covered calls are often used during periods when investors expect the stock to move sideways or rise modestly rather than surge sharply higher.

Why Tesla Is Popular for Covered Calls

Tesla stands out in the options market for several reasons:

High volatility: Tesla’s price movements tend to be larger than average, increasing option premiums.
Strong liquidity: Tesla options trade with high volume and tight bid-ask spreads.
Large retail ownership: Many Tesla investors already hold 100+ shares, making covered calls accessible.
Frequent expirations: Weekly and monthly options provide flexibility in strategy selection.

These factors combine to make Tesla one of the most commonly used stocks for covered call strategies.

How Tesla Covered Calls Generate Income

When you sell a covered call, you receive an option premium immediately. This premium is yours to keep regardless of how the trade ultimately resolves.

The income comes from:

Time decay of the option
Volatility priced into Tesla options
The buyer paying for upside exposure

Possible outcomes include:

Tesla Stock Price at Expiration

What Happens

Result

Below strike price

Option expires worthless

Keep shares + premium

Near strike price

Option may expire

Keep shares + premium

Above strike price

Shares called away

Keep premium, sell shares at strike

Covered calls do not eliminate risk, but they do provide predictable income in exchange for limiting upside.

Example of a Tesla Covered Call Trade

Assume the following hypothetical scenario:

Tesla trading at $250
Investor owns 100 shares
Sells a $270 call option expiring in one month
Receives $6.00 per share in premium ($600 total)

If Tesla stays below $270 at expiration:

The option expires worthless
The investor keeps the $600 premium
Shares remain owned

If Tesla rises above $270:

Shares are sold at $270
The investor keeps the $600 premium
Upside beyond $270 is forfeited

This example highlights the core tradeoff of Tesla covered calls: income now versus unlimited upside later.

Risks of Tesla Covered Calls

While covered calls are often described as conservative, Tesla covered calls still carry meaningful risks.

Key risks include:

Capped upside: Sharp Tesla rallies can result in missed gains.
Assignment risk: Shares may be sold earlier than expected.
Downside exposure: Covered calls do not protect against large declines.
Emotional risk: Long-term Tesla holders may regret selling calls during strong moves.

Selling covered calls on a volatile stock like Tesla requires accepting these tradeoffs in advance.

Tesla Covered Calls vs Holding Tesla Stock

Holding Tesla stock outright offers:

Unlimited upside
Full exposure to price movements
No option management

Tesla covered calls offer:

Ongoing income
Reduced upside potential
More active management

Neither approach is inherently better. The decision depends on time horizon, risk tolerance, and whether income generation is a priority.

Weekly vs Monthly Tesla Covered Calls

Tesla covered calls can be sold using different expirations.

Weekly covered calls

Faster time decay
More frequent management
Lower premium per contract

Monthly covered calls

Higher premiums
Less frequent adjustments
Shares committed for longer periods

Some investors prefer weeklies for flexibility, while others prefer monthlies for simplicity.

Common Mistakes With Tesla Covered Calls

Common issues include:

Selling calls too close to the current price
Selling calls before earnings announcements
Underestimating assignment risk
Ignoring tax consequences
Chasing premium instead of strategy alignment

Covered calls work best when used deliberately rather than reactively.

Are Tesla Covered Calls a Good Strategy?

Tesla covered calls can be useful in certain environments, particularly when:

Income is a priority
Expectations for rapid upside are low
Investors are comfortable selling shares at predetermined prices

They are less effective when Tesla enters strong bull runs or experiences sudden price re-ratings.

Like any options strategy, covered calls should align with broader portfolio goals rather than exist in isolation.

Who Typically Uses Tesla Covered Calls?

Tesla covered calls are commonly used by:

Income-focused investors
Long-term holders managing large positions
Investors comfortable with options mechanics
Those seeking cash flow during consolidation periods

They are generally not suited for investors unwilling to sell shares under any circumstances.

Frequently Asked Questions About Tesla Covered Calls

What happens if Tesla stock goes above the strike price?

If Tesla trades above the strike price at expiration, the shares may be sold at the strike price.

Can I lose money selling Tesla covered calls?

Yes. If Tesla declines significantly, losses on the stock can exceed the option premium received.

Do Tesla covered calls work in bull markets?

They often underperform during strong bull markets due to capped upside.

Are covered calls taxable?

Tax treatment depends on jurisdiction, holding period, and account type.

How many shares do I need to sell a covered call?

Each covered call requires ownership of 100 shares of Tesla stock.

Can I close a Tesla covered call early?

Yes. Covered calls can be bought back before expiration if desired.

Final Thoughts on Tesla Covered Calls

Tesla covered calls are a tool—nothing more, nothing less.

Used thoughtfully, they can generate income and reduce portfolio volatility. Used carelessly, they can create regret, especially when Tesla moves faster than expected.

Understanding the mechanics, risks, and tradeoffs is essential before relying on this strategy as part of a long-term Tesla investment approach.