Tesla, Inc. (TSLA) one-month put options command high premiums, making them attractive to short sellers. It also offers an attractive way for value investors to set a lower potential buy-in price.
For example, it's possible to sell short a 6.6% lower put option expiring in one month and make an immediate 3.0% yield. This article will delve into this play.
Tesla is at $400.35 in midday trading on Friday, March 6. That's down from a peak of $489.88 but up from a recent trough price of $392.43 on March 3.
Closing Out an Older OTM Short Put Play
I discussed shorting out-of-the-money (OTM) puts at $395.00 and $400.00 expiring today in a Feb. 3, 2026, Barchart article. At the time, the $400 premium was $10.52, offering a short-seller a one-month yield of 2.63% (i.e., $10.52/$400 = 0.0263). This strike price was 6% below the spot price - i.e., 6% OTM.
It now makes sense for investors to roll this over to generate a new one-month yield.
The ask side premium today is $2.98, so the investor would enter an order to “Buy to Close” this short trade. The net return is $10.52-$2.98, or $7.54. That means the investor who originally secured $40,000 with their brokerage firm would make a net one-month return of $754, or 1.885% for the month.
That's a great return, representing an annualized ROI of 22.62%, assuming it can be repeated.
Shorting OTM Puts Again
For example, look at the April 10, 2026, expiry period. It shows that the $375.00 strike price put option contract, which is 5.93% lower than today's price, has a midpoint premium of $12.40.
That means an investor who secures $37,500 with their brokerage firm can enter an order to “Sell to Open” 1 put at $375, and immediately collect $1,240 in their account. That represents a one-month yield of 3.30%.
Moreover, shorting the $370 put option contract provides an investor with almost a 3.0% yield (i.e., $10.98/$370.00 = 0.0297, or 2.97%).
Note that the delta ratio is low (-0.27), implying just over a 25% chance that TSLA will fall to $370.00 by April 10, based on its historical volatility. Even if this happens, the breakeven point for an investor is low:
$370- $10.98 = $359.02 B/E
That is about $40 below today's price, or 10% out-of-the-money. That is a great opportunity for value investors.'
Why is that a great play? TSLA stock is worth much more.
TSLA Price Targets
I discussed this in my last Barchart article on Feb. 3 after Tesla had released its earnings and shareholder deck on January 29. I showed that TSLA stock could be worth $500.00 per share, based on its strong free cash flow (FCF) margins and analysts' revenue estimates.
Analysts still have higher price targets. For example, AnaChart's survey of 27 analysts shows an average PT of $411.82. Moreover, Yahoo! Finance's survey of 46 analysts has an average PT of $421.61.
Similarly, Barchart's mean price target survey is $408.36. The point is that analysts still see upside in TSLA stock from today's price.
The bottom line is this is why it makes sense to sell short out-of-the-money (OTM) puts for value investors.
They get the best of both worlds - a potential lower buy-in price, and a nice yield (3% or more) for 6-7% lower strike prices.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
- Unusual Options Activity Suggests the Smart Money Is Bullish About Rio Tinto Stock Despite Glencore Deal Collapse
- Tesla Put Option Premiums are High - Attractive to Short Shellers and Value Investors
- Trade the Deep Value and Dubious Option Pricing in Microsoft Stock with This 1 Great Options Strategy
- Why the Charts Say It Might Be Time for a Big Short on Google Stock
