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The wheel on Tesla (TSLA): big premiums, big gaps, and why many skip it
Tesla's option premiums are some of the biggest among large companies. That is exactly why many careful sellers stay away. Here's what the premium is paying for, with a hypothetical loss worked out.
What Tesla is like for the wheel
Tesla (TSLA) makes electric cars, batteries and energy storage. Its stock trades as much on stories about the future as on today's sales. As of October 2026 it is one of the most traded stocks in the US, and its options are among the most active of all.
For the wheel strategy, that gives you:
- Very high Implied volatility for a company its size. The market prices TSLA to move a lot. That is why its premiums dwarf those of most large companies.
- Very liquid options, with weekly expiries and tight spreads near the price.
- More than one "event" a quarter. Earnings, plus delivery numbers each quarter, plus product events and news about its CEO. Any of them can gap the stock.
- No dividend. Nothing pays you to hold the shares while you wait.
- A large cash need. Even after splits in 2020 and 2022, 100 shares is a big position for most accounts.
Tesla is here because people search for it. Nothing on this page is a recommendation.
Why the premium is so big
An option's price rises with the size of the move the market expects. TSLA is expected to move a lot, so its options cost a lot.
That means a big premium on Tesla isn't a better deal. It's a fair price for a bigger risk. The seller collects more because the seller is more likely to be hit, and hit harder. Our page on why a high premium is a warning goes deeper.
Both tails can hurt
On a calm stock, the wheel mostly worries about one thing: the stock falling. On a stock this jumpy, both directions hurt.
- A gap down skips past your put strike. You buy 100 shares at the strike while they trade far below it.
- A gap up blows through your covered call. Your shares are sold at the strike while the stock runs far above it.
The wheel keeps the downside of owning the stock and gives away most of the upside. On a stock with huge swings, both of those are large numbers.
A drop, then a squeeze (an illustration, not a trade idea)
The numbers are for a made-up carmaker, XYZ. They are not Tesla's prices.
Month 1. XYZ is at $300. You sell a 30-day $260 put for $10.00. You collect $1,000. Your broker sets aside $26,000. Delivery numbers disappoint. XYZ drops to $200. You're assigned at $260.
Month 2. You sell a $250 call for $4.00 ($400), already a little under your $260 cost. XYZ slides to $190. The call expires.
Month 3. You sell a $220 call for $6.00 ($600), far below your cost, because the higher strikes pay less. A product event sends XYZ to $320. Your shares are called away at $220.
| After month | XYZ price | Shares vs $260 paid | Premiums so far | Total |
|---|---|---|---|---|
| 1 (assigned) | $200 | −$6,000 | +$1,000 | −$5,000 |
| 2 ($250 call expires) | $190 | −$7,000 | +$1,400 | −$5,600 |
| 3 (called away at $220) | $320 | −$4,000 | +$2,000 | −$2,000 locked in |
| 3, plain shareholder who bought at $260 | $320 | +$6,000 | — | +$6,000 |
The wheel seller collected $2,000 in premium, more than most stocks would ever pay, and still lost $2,000. The person who simply bought at the same price and held is up $6,000. The gap down hit the put. The squeeze up hit the call.
That is a math example, not a prediction about Tesla. It shows why a big premium can still lose: on a stock with big swings, the move is often bigger than what you were paid.
Why many sellers stay away
These are the reasons that come up again and again:
- One contract is a big bet on one stock. The cash set aside for a single put can be a large share of a normal account.
- The premium isn't spare money. It's the market's price for big moves. Over time, sellers get hit by those moves.
- Events come often. It's hard to find a 30-day window with no earnings, no delivery report and no big news.
- The story can change fast. A stock that trades on expectations can reprice in a day when expectations shift.
- It's hard to hold calmly. A 10% move against you in a single week isn't unusual here. Fear leads to bad decisions, like selling calls far below your cost.
None of that makes Tesla wrong for everyone. It makes it a stock where your plan for the bad day matters more than the premium.
If you still want to try it
- Run the size check first. Strike × 100. Is that a sensible slice of your account for one volatile stock? If not, stop here.
- Map every event in the window: earnings, the delivery report, any product event.
- Choose a put strike you'd be glad to own at, even after a big drop.
- Paper trade a few cycles first. Watch what a normal TSLA month does to a short put before money is on the line. See is selling options gambling? for the sizing rules that matter most.
- Already own 100 shares? A covered call alone is a simpler start. You just need to be fine selling at the strike.
Account note: covered calls are widely allowed in a TFSA or RRSP; cash-secured puts depend on the broker. Options approval levels differ by broker in both countries.
Questions
Is Tesla good for the wheel strategy?
It has liquid options and very high premiums. It also has frequent gaps in both directions, many news events and a large cash need. Many sellers avoid it for those reasons. Nothing here is a recommendation.
Why does Tesla pay such high option premiums?
Its implied volatility is high, so the market expects big moves. The premium is the price of that risk. A higher premium comes with a higher chance of assignment and a bigger possible loss.
What happens if Tesla gaps down through my put?
You're assigned at your strike, even though the shares trade far lower. The premium offsets only part of the loss. You then choose: hold and sell calls, or sell the shares and take the loss.
Is a covered call on Tesla less risky than the full wheel?
It uses shares you already own, so there's no new cash at risk. But the shares still carry the full downside, and a big jump can sell them at the strike. It changes the shape of the risk, not its size.
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