The Trade at a Glance
- Account Size: $100K
- Underlying Stock: Tesla Inc. ($TSLA)
- Strategy: Selling a Covered Call
- Action: Sold 1 May 16 $290 Call against owned shares for $1,210 credit
Key Metrics
- Premium Collected: $1,210
- Expiration Date: May 16
- Strike Price: $290
- Obligation: If $TSLA trades above $290 by expiration, shares may be called away at the strike price.
Why This Trade Makes Sense
Generating Income from Owned Shares
Selling covered calls provides instant premium income, boosting overall returns on the position.
Managing Volatility
Tesla stock is known for its volatility. This trade takes advantage of elevated options premiums.
Defining an Exit Plan
If assigned, we secure a sale price of $290 per share, locking in gains while still benefiting from the collected premium.
Next Steps
- If TSLA stays below $290: We keep the full premium and can sell another call.
- If TSLA moves above $290: The shares may be called away, but the total return includes both the capital gains and the premium collected.
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