When you’re trading Tesla around earnings or any major market-moving event, how you structure the trade is just as important as the direction you’re betting on.
In this focused session, I walk you through a handful of practical setups I use often. These aren’t just theoretical—they’re strategies designed for real earnings events, volatility spikes, and post-news reactions.
Below, you’ll find a clip from the Tesla 4D Bootcamp where I break these approaches down step by step.
Think of this as a reference you can bookmark and return to whenever you need a quick refresher on building smarter, better-defined trades.
What You’ll Learn in This Clip
Here’s what I covered:
- How I approach covered calls—and when they make the most sense
- Poor man’s covered calls—a way to get similar results without tying up full capital
- Bullish put spreads—why I like them for generating defined-risk income
- Bearish put spreads—how I structure them for a move lower without overexposing risk
- Straddles & strangles—why they’re tempting around earnings and what you really need to watch for
I walk through each setup with Tesla as the example—so you can see exactly how it applies around earnings events and beyond.
Now, let’s take a closer look at the first setup—Covered Calls—and why they’re one of the simplest ways to create income while managing risk.
Covered Calls: A Simple Way to Generate Income
When I’m holding Tesla shares—or any stock that’s been on a strong run—I’ll often look to sell covered calls as a way to generate additional income without overcomplicating the trade.
Here’s how I frame it:
- You already own the shares.
- You sell a call option at a strike price slightly above where the stock is trading.
- If Tesla stays below that strike through expiration, you keep the premium as pure income.
- If it rallies through your strike, you still profit on the move up to that strike—and you walk away with gains on the stock plus the premium.
It’s a straightforward strategy, but there are a few key considerations I always keep in mind:
- Don’t go too aggressive on the strike. If you’re too close to the current price, you’re more likely to get called away.
- Know your timeframe. Around earnings, implied volatility is elevated—which means the premiums are richer, but also that you’re taking on event risk.
- Always have a plan. If you’re not comfortable parting with the stock, avoid strikes that are “too close for comfort.”
In the clip, I show you exactly how I map this out on Optionsprofitcalculator, so you can see what the risk/reward looks like in real time.
Poor Man’s Covered Call: Lower-Cost Income Setup
If you like the concept of a covered call but don’t want to tie up the full capital to own Tesla shares, you can use what’s called a Poor Man’s Covered Call (PMCC).
Here’s how it works:
- Buy a deep-in-the-money long-dated call (like a LEAP) that behaves like a stock substitute
- Sell a shorter-dated out-of-the-money call against it to collect premium
This setup mimics the payoff of a covered call but with far less capital required.
The key advantages:
- Lower upfront cost. You’re renting synthetic stock exposure instead of buying 100 shares outright.
- Same premium income. You can still sell calls repeatedly against your LEAP position.
- Defined max risk. Unlike owning the stock, your risk is capped at the cost of the LEAP.
In the clip, I walked through how this looks for Tesla heading into earnings:
- A deep ITM LEAP that acts as your core position
- A weekly call sold against it to capture inflated premiums before the report
It’s a great way to generate income without committing full capital to 100 shares—and it’s especially useful for high-priced stocks like Tesla.
Call Spreads: Smarter Directional Bets
Buying a naked call can feel simple—but it’s often not the most efficient trade. Tesla’s implied volatility can inflate premiums, leaving you paying too much for the upside.
That’s where a call spread makes sense.
Here’s the structure I walked through:
- Buy a call closer to the money—where you want exposure.
- Sell a higher strike call in the same expiration to offset some of the cost.
What this does is create a defined range of profit. You’re capping the upside, but you’re also dramatically reducing the capital outlay.
Why do I like this?
- Lower breakeven. You don’t need as big of a move to be profitable.
- Reduced exposure to volatility crush. After earnings, implied volatility collapses. A spread naturally hedges that.
- Clear risk/reward. You know exactly what you can make—and what you can lose.
In yesterday's session, I priced a simple Tesla call spread heading into earnings. You could see the difference:
- Buying the straight call cost thousands
- The spread cost a fraction, but still gave a strong risk/reward profile
For traders managing smaller accounts—or those who want a cleaner setup for events like earnings—it’s one of the best tools.
Bullish & Bearish Put Spreads: Defined-Risk Income and Protection
Put spreads are one of the most versatile defined-risk structures you can use around earnings.
When you’re bullish and want to generate income:
- Sell a put at a strike you’re willing to own Tesla
- Buy a lower strike put to cap the downside risk
This creates a bullish put spread, which collects premium as long as Tesla stays above your short strike. It’s like saying, “I’m fine owning the stock lower, but I’m still protecting myself.”
When you’re bearish heading into an event:
- Buy a put closer to the money
- Sell a further out-of-the-money put to reduce the cost
This creates a bearish put spread, which profits if Tesla moves lower but keeps your risk limited.
Here’s why I like these spreads around earnings:
- They’re cheaper than outright puts or calls
- They give you a defined max loss and max gain
- They can be tailored to the expected move the market is pricing
In the session, I showed a Tesla bearish put spread ahead of earnings that gave better risk/reward than just buying puts outright.
Probability of Profit: A Useful Guideline
Here’s something I always stress when we talk about probability of profit (POP)—it’s not a magic number.
POP simply tells you the statistical likelihood that your trade will finish above breakeven, based on current pricing and volatility. It’s helpful, but it’s also dynamic. The market shifts, volatility changes, and POP adjusts along the way.
For example, going into Tesla earnings:
- A short-dated call might show a low POP because the move required is large.
- A wider call spread might show a higher POP because your breakeven is lower.
But here’s the catch—high POP doesn’t always equal high reward.
What I want you to take away is this:
- Use POP to compare relative setups. If one structure has a noticeably higher probability than another with similar risk, it’s worth considering.
- Don’t ignore the payoff profile. A trade can have a 70% POP but only make a tiny credit if it wins—while a 40% POP setup might offer asymmetric upside.
- Always overlay it with the chart, the catalyst, and the expected move. POP doesn’t replace context—it supplements it.
In the session, I showed how Tesla’s implied move priced before earnings impacts POP—and why sometimes a slightly further-out expiration gives you better odds for only a little more time.
Straddles & Strangles: The Tempting Earnings Gamble
A lot of traders look at Tesla earnings and think, “I’ll just buy a straddle or strangle and win no matter what direction it moves.”
Here’s the reality:
- A straddle = buy a call + put at the same strike
- A strangle = buy an out-of-the-money call + put
They seem attractive because they benefit from big moves in either direction, but the break-even is huge since you’re paying for both sides.
The two big problems around earnings:
- Implied volatility crush. Even if Tesla moves, the IV drop can wipe out a big chunk of the premium.
- Move vs. expectation. The market has already priced the “expected move.” If Tesla doesn’t exceed that, both legs can lose.
In the session, I showed how Tesla’s implied move before earnings often matches the actual reaction. So unless you’re confident in an outsized move beyond the expected range, a straddle or strangle is usually an expensive lottery ticket.
Here’s What You Don’t Want to Do Before Tesla Reports Earnings
Before Tesla earnings, it’s tempting to go all in on a single naked call—chasing that “big score” if the stock gaps higher. But that’s exactly how traders bleed out premium.
When you buy a naked call right before earnings:
- You’re paying inflated premiums driven by high implied volatility.
- Even if Tesla moves up, the move might not be big enough to outpace the volatility crush after the report.
- And if the stock stalls or moves the other way, the value of that call can drop to near zero overnight.
It feels exciting, but it’s a one-dimensional trade that leaves too much to chance.
What you want instead is structure—something that defines your risk, reduces cost, and actually matches the expected move of the stock.
That’s why we shifted the focus toward defined-risk spreads. With a call spread, you’re not overpaying for inflated premium. You’re building a smarter trade that:
- Caps your downside risk.
- Uses the market’s own expected move as your roadmap.
- And gives you a better probability of profit without needing a massive gap to win.
Now, let’s dig into how to build a simple call spread for earnings and why it’s one of the most reliable ways to trade Tesla during high-volatility events.
Building a Smarter Trade Before Earnings
One of the key takeaways from this session is that earnings trades don’t have to be a coin flip. You can structure them in a way that defines your risk while still giving you a shot at meaningful upside.
Here’s the framework I walked through:
- Start with the expected move. Before earnings, the options market is already pricing in how far Tesla could realistically move. That number sets the “range” you’re playing inside.
- Pick strikes that make sense. For this example, I looked just outside the expected move – enough room to capture a surprise rally, but without overpaying for an option that’s unlikely to hit.
- Use a call spread, not a naked call. By selling a higher strike against the call you’re buying, you immediately lower the cost of the trade. Yes, it caps your upside, but it also makes the probability of profit much more favorable.
It looked something like this:
- Buy the 270 call
- Sell the 280 call
- Total risk = the net debit you paid, which is a fraction of buying the outright call
- Max profit = the spread width minus that debit, if Tesla clears both strikes after earnings
Why does this work better than just buying a straight call? Because you’re leaning into the realistic move. You’re not hoping for an outsized, one-in-a-million earnings reaction. You’re structuring around what the market has already priced.
This isn’t specific to Tesla. It’s a repeatable framework you can use for Apple, Nvidia, or any stock heading into a big event. It’s how you stop “hoping” and start building deliberate, controlled earnings trades.
Bringing It Back to the Tesla 4D Framework
This is exactly why I built the Tesla 4D framework—to take the guesswork out of earnings events and volatile catalysts.
Instead of chasing headlines or hoping for a lucky break, you’re working from a repeatable structure. You know how to read the expected move, position inside realistic price targets, and control risk without limiting opportunity.
Tesla is the ultimate proxy for this approach. It’s liquid, it moves fast, and it reacts to news like no other stock. Once you understand how to frame trades around it, you can apply the same logic to almost any earnings setup—whether it’s Tesla, Apple, or the next big mover.
This section is here as a reference you can return to anytime. Watch it, revisit the examples, and use it as a reminder that clarity and structure always win over guesswork.
Until next time...
Stay Positive,
Garrett Baldwin