Tesla (TSLA) stock has experienced a period of relative stability over the last three months, trading around the $430 level, approximately where it was two months prior. Within this context, a strategy of shorting out-of-the-money (OTM) put options has emerged as a profitable endeavor, driven by the high premiums offered by contracts expiring in one month. Investors are capitalizing on this dynamic, seeking consistent income streams from their portfolios. Specifically, the strategy involves selling short put options with strike prices below the current market price, collecting premiums in exchange for the obligation to buy shares at that strike price should the stock price decline.
The recent success of this approach was highlighted in a Barchart article published on October 26th, which identified potential value in Tesla stock, projecting a price exceeding $500. That article recommended shorting the $400.00 put option (7.7% below the trading price at the time) expiring on November 28th, and produced an immediate yield of 3.0%—equivalent to collecting a premium of $11.95 for every $400 invested. On November 28th, Tesla closed at $430.17, confirming the strategy’s effectiveness. This meant the investor was not obligated to purchase shares at the $400 strike price, resulting in a 3.0% return on the investment for the month alone.
Looking ahead to January 2, 2026, the opportunity to replicate this trade remains attractive. Analyzing that option expiry chain reveals that the $405.00 strike price put contract currently offers a premium of $10.68 per contract—a yield of 2.6370%. Alternatively, the $400.00 put strike price provides a premium of $9.27, generating an immediate yield of 2.3175%. Therefore, an investor employing both of these short put plays could achieve an average yield of approximately 2.477%, or $9.975 on an investment of $402.50. This equates to a 2.478% return, representing a significant premium compared to simply holding shares at the current $430.00 level.
Furthermore, even if Tesla’s stock price were to fall to the $405 strike price, the investor’s breakeven point would still be $21.93 lower, considering the income already received. This demonstrates that, in the short term, exploiting the high option premiums associated with Tesla stock through short put strategies provides a superior return compared to direct stock ownership. By capitalizing on this dynamic, value investors are able to generate substantial income while maintaining a cautious approach to the company’s performance. The key takeaway is that despite Tesla’s relative stability, the opportunity remains for investors to generate a compelling return by strategically shorting OTM put options.