The Trade at a Glance
- Underlying Stock: Tesla Inc. ($TSLA)
- Strategy: Sell 1 Cash-Secured Put
- Expiration: February 28
- Strike Price: $290
- Premium Received: $570
- Margin Requirement: $29,000 (secured cash for 100 shares)
Key Metrics
- Max Profit: $570 (collected upfront)
- Return on Capital: 1.97% in about two weeks ($570 / $29,000)
- Break-Even Price: $284.30 ($290 strike – $5.70 premium)
- Risk: Obligation to buy 100 shares of $TSLA at $290 if assigned
Why This Trade Makes Sense
Income Generation
Selling puts generates instant premium income, offering a 1.97% return in just two weeks—a solid short-term yield compared to traditional investments.
Stock Acquisition at a Discount
If assigned, you buy $TSLA at an effective price of $284.30, below the current market price.
Capital Efficiency
A $100K account can leverage cash-secured puts to generate consistent income while maintaining capital for other trades.
Risk Management
- Max Loss Scenario: If $TSLA drops to zero, the potential loss is $29,000 – $570 = $28,430
- Mitigation Strategies:
- Monitor price action and consider rolling the put if it makes sense to extend duration and collect more premium.
- Only trade if you’re comfortable owning $TSLA long-term at $290.
Why $TSLA?
Tesla remains a leader in electric vehicles and renewable energy, with high growth potential and frequent price volatility. Selling puts on established companies like Tesla offers strong premium opportunities and the chance to acquire shares at a discount.
Final Thoughts
Selling cash-secured puts is a disciplined approach to income generation with defined risk. This $TSLA trade balances risk and reward, making it an attractive addition to a $100K options portfolio.
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Disclaimer: This post is for educational purposes only. Past performance isn’t indicative of future results. Options trading carries significant risk.
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