Tesla Stock: How I Traded It & My Final Income Numbers
Tesla has been one of the most exciting yet challenging stocks to trade over the years. As a trader who has held a position in Tesla for over four and a half years, I recently made a major decision: I took most of my position off the table. This move wasn’t based on emotions but on strategic market signals, chart patterns, and disciplined trading principles. In this blog, I will walk you through my trading journey with Tesla over the last six months, discuss key takeaways, and reveal my final income numbers.
The Tesla Trade: A Wild Ride
Starting Point: Where It All Began
Back in October, Tesla was trading at around $245 per share. At that point, I set my line in the sand—a strategic price point to track the stock's movement. Over the next several months, Tesla’s price action was nothing short of a rollercoaster:
- From $245 to $488: The stock nearly doubled, delivering substantial gains.
- From $488 to $333: A steep pullback followed, signaling a shift in momentum.
- Final Exit: At $333, I decided to exit my position based on technical signals and risk management.
Chart Analysis: Key Warning Signs
While Tesla initially showed strong upward momentum, I recognized a series of warning signs indicating a potential downtrend:
- Moving Averages Crossed Bearishly – A critical sign of weakening momentum.
- Stock Living Below the 50-Day Moving Average – A sign of persistent selling pressure.
- Multiple Consecutive Down Days – Indicating a loss of buyer support.
- Filling Chart Gaps at Key Levels – Suggesting potential further downside moves.
Recognizing these patterns, I made the tough but necessary decision to exit my position and secure my gains.
How Covered Calls Performed in This Trade
One of the biggest misconceptions about covered calls is that traders lose money when stocks go up. That’s simply not true! Covered calls generate income, known as "the juice," which protects against volatility and market downturns.
The Cash Flow Strategy: Generating Income Every Week
Throughout this trade, I used a structured covered call strategy:
- Sell Calls Weekly: Collect premiums for income generation.
- Roll Positions When Necessary: Adjust strike prices to maintain flexibility.
- Manage Risk with Stop Losses: Avoid major losses by setting circuit breakers.
Over the six-month period, I executed dozens of covered call trades, balancing risk and income along the way.
Final Income Numbers: Did the Strategy Work?
Now, let’s break down the financials:
- Long Position (Base Stock Gains):
- Initial Buy Price: $245 per share
- Final Exit Price: $333 per share
- Total Gain from Stock Movement: +$37,300
- Short Position (Covered Call Income):
- Total Premiums Collected: +$236,500
- Costs of Rolling & Buying Back Calls: -$80,000
- Net Covered Call Profits: +$156,500
Total Net Profit: $236,500 in 6 Months
Despite Tesla’s volatility, the strategy produced a quarter-million-dollar gain over six months, proving that covered calls can be an effective way to generate consistent income in any market condition.
Lessons Learned & Takeaways
- Covered Calls Work Best in a Stable or Rising Market
If a stock is moving up or trading within a range, selling covered calls is a powerful income strategy. However, if the stock is in a persistent downtrend, traders need to be proactive in managing risk.
- The Importance of Stop Losses & Circuit Breakers
Setting predefined exit points is crucial. While many traders hold on to their positions, having a clear stop loss can prevent major drawdowns.
- Rolling Up vs. Taking Profits
Rolling up allows traders to maintain their positions while continuing to collect income, but knowing when to take profits is equally important. Timing is key.
- The Market is Unpredictable—Trade Your Plan
Nobody can predict the market perfectly. While I exited Tesla at $333, it later rebounded another $25. However, sticking to my plan ensured a profitable outcome.
Life-Improving Tips for Smart Investing
- Stay Disciplined with Your Strategy – Success in the stock market comes from following a structured approach. Avoid emotional trading and stick to your predefined rules.
- Think Long-Term, Even When Trading Short-Term – Even if you're trading options weekly, keep a long-term perspective on wealth building. Compound growth is key.
- Protect Your Capital First – Generating income is important, but not losing money is even more critical. Always have risk management in place.
- Be Adaptable to Market Conditions – The stock market changes, and so should your approach. If a strategy stops working, adjust and optimize.
- Take Profits When the Market Gives You a Gift – Many traders hold on too long, hoping for bigger gains. Taking profits along the way ensures you lock in success.
- Surround Yourself with Smart Investors – Learn from experienced traders and continuously improve. Join communities or masterminds to stay ahead.
- Invest in Your Education – Read books, take courses, and follow financial experts. Knowledge is your best asset in the market.
FAQs About Covered Calls & Tesla Trading
- Do I lose money when the stock goes up in covered calls?
No! A common misconception is that you lose money if the stock rises above the strike price. While you may need to roll up, you still profit from stock appreciation and premium income.
- What happens if Tesla crashes after I sell covered calls?
If Tesla declines, the collected premiums provide a cushion against losses. Additionally, you can roll down or close the position to minimize risk.
- Should I always roll my covered calls?
Not necessarily. Rolling helps extend your position, but if the market signals a downtrend, it may be better to exit the trade and protect your capital.
- Can I trade covered calls with a small account?
Yes! You can use synthetic positions (buying deep-in-the-money calls instead of stock) to trade covered calls with less capital.
- How much time does managing covered calls take?
Not much! You can manage covered calls in about 20 minutes per week if done systematically.
- Is this strategy safe for beginners?
Yes, covered calls are one of the most beginner-friendly options strategies since they generate income while reducing downside risk.
Call to Action
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Conclusion: Why This Trade Was a Success
Many traders panic when a stock moves against them, but having a structured strategy allows for consistent profits over time. Covered calls provided steady income while reducing risk, and setting circuit breakers ensured I exited at the right time.
