Tesla Options Trade Ideas: A Ratio Diagonal Instead of 100 Shares

Tesla was trading around $350 when this conversation was recorded. A covered call on it means buying 100 shares first, which is about $35,000. Erik from Outlier Trading walked Matt through a different route: get long Tesla with options only, using a ratio diagonal that cost a fraction of the stock and kept the upside uncapped.

Erik’s goal was to share how he generates an idea and builds a trade around it. He started with Tesla’s recent moves, compared calls across expirations, used open interest to narrow the choice, and then he and Matt modeled the final trade, and its bearish twin, in Option Omega’s modeling tool.

Chart context before strikes

Erik’s first step is to zoom out and measure what the stock has actually done. He was clear that this was not a call on Tesla’s direction. In his own book, he said, Tesla was not something he would be getting long. At the time it was about 30.5% off its one-year high and had sold off for most of the year. The long thesis was a scenario for the exercise.

His view is that charts are not an edge on their own, but they are not “fairy dust” either. He measured several recent swings:

Move	Size	Duration
Recent pullback	about 16% down	16 trading days
Rally after that pullback	about 23.5% up	about 24 trading days
Another swing	about 30%	16 days
Short drop	about 10% down	6 days
Larger decline	about 44% down	17 trading days
Larger rally	about 127% up	40 trading days

The takeaway he drew: Tesla can move anywhere from 10% to 50% in windows of about 10 to 50 trading days. He used that range as context for building the trade.

Being wrong is part of the job

Erik has traded since 2007 and says he is “wrong all the freaking time.” His point was about expected value. In his example, a trade wins $100 35% of the time and loses $10 the other 65%. It loses more often than it wins and still comes out ahead in that example, because the wins are large relative to the losses.

Same strike, three expirations

To show why the Greeks matter, Erik modeled buying an at-the-money 350 call in three expirations: about 72 days (June), 38 days (May) and 10 days (April). Then he passed a couple of days with no price change.

• The June call lost about $49.
• The May call lost about $62.
• The April call lost about $99.

Next he skipped past Tesla’s earnings (the 22nd, after the close) and assumed a 15% move up. The April call would have expired before earnings, so he dropped it. The May call made about $3,525 and the June call about $3,375. The nearer option has more gamma, so it gains delta faster as the stock moves in the trade’s favor.

Building the longer-term position

The main scenario was thematic: hold for at least three months, without trading much. The obvious choice would be the July expiration. Erik’s concern is that by the end of a three-month hold, a July option would be close to expiry, where the Greeks start “going parabolic.”

He used the options chain itself to simulate time passing. A July 360 call cost about $28.95, with about a 52 delta, gamma of about 0.005, and theta of about -0.172, so it lost a little over 17 cents a day. He noted that gamma is tiny that far out even at the money.

Narrowing the expiration with open interest

To choose a term further out, he checked open interest on the calls:

Expiration	Call open interest
18 Sep	about 166,000
16 Oct	about 9,000
20 Nov	about 47,000
18 Dec	about 290,000

Standard expirations tend to cluster open interest, so he ruled out October and narrowed the choice to a few terms such as September, December and January. November was also satisfactory on open interest. He also noted that round strikes such as the 350s tend to have more liquidity.

At the 350 strike, December calls cost about $59.30 and November calls about $55. That is roughly $6,000 up front instead of about $35,000 for 100 shares. Erik said he would manage the trade with stops rather than risk the full premium. On the November term, the position still lost almost 13 cents a day to theta.

The ratio diagonal

To offset that daily cost, Erik likes to sell a nearer-term call against the long call. That makes a diagonal. The problem with a plain one-by-one diagonal, in his words, is that “you can be too right.” When he modeled a short 30-delta April call against one long call, a 15% rally put the trade past its max profit and could even turn it into a loss.

The reason: the far-dated long has little gamma, so its delta barely grows as the stock rises. The near-dated short gains delta fast and heads toward -100 deltas per contract, outpacing the long.

His fix is the ratio: two longs for each short.

• The two long calls start at about 120 deltas (near 60 delta each), compared with the 100 deltas of owning 100 shares. The short call’s deltas offset part of that.
• It can reach a maximum of 200 long deltas against 100 short, so the upside is not capped.
• The total outlay was about $11,000 to $12,000, still well below the $35,000 for 100 shares.

Modeling it in Option Omega

Matt built the trade in Option Omega’s modeling tool: short one 365 call at 10 DTE (April 17 expiration) and long two at-the-money 350 calls at 227 DTE (November). Stepping through time on the payoff chart showed the delta curve and the benefit of the extra long call on any move up.

With gamma added to the chart, Erik pointed out how little it changed early on. The readout in the bottom-left corner stayed at zero for days. Gamma only built up as the position got close to expiration, which Erik called a massive benefit of staying out of the front month.

Matt’s own preference, setting earnings aside, would be to sell the short call further out in time. With earnings on the horizon, he suggested moving the short past the next earnings date, to July, at a strike such as 370, since the short would carry some extra premium from that event. In the model that version cost less to get into and kept the uncapped upside, but on a very different time horizon. Both agreed there is no right answer until hindsight: a bigger move favors one setup, a quieter market the other.

The bearish version with puts

Matt said that in Tesla at that moment he would be more inclined to take the downside version. They switched the model to puts:

• Long two 400 puts at 227 DTE, about 52 delta
• Short a 335 put at about 10 DTE, about 20 to 25 delta

Erik said the 400 puts were a quick pick. He would prefer long puts of no less than 60 delta, ideally 70 or more, because at 52 delta the position captures only about half of each dollar the stock falls. Going deeper in the money also cuts the extrinsic value he pays, which matters because puts on most mainstream names carry put skew. The trade-off is more money up front and a bigger loss on an adverse move.

Matt’s point was that this structure is a real alternative to shorting the stock. With the long puts, in his words, “you have a debit that you can lose,” which he called a very different risk profile from a naked short in a stock as volatile as Tesla.

Key takeaways

• Erik measured the stock’s recent moves before picking strikes and found Tesla swings of 10% to 50% over about 10 to 50 trading days.
• Comparing the same strike across expirations showed near-dated options losing value to time faster but gaining more on a quick move.
• Open interest narrowed the expiration choice. Standard monthlies clustered most of it.
• A one-by-one diagonal can lose money if the stock rallies too far. In the model, ratioing two longs to one short kept the upside uncapped.
• As Matt framed it, the put version’s risk is the debit paid, a very different profile from a naked short.

You can build a trade like this and step it through time with live Greeks and payoff charts using Option Omega’s modeling tools. When you want to test an idea across history, use the backtester. Start a free trial to try both. Erik’s channel is at Outlier Trading.

Watch the full video: Tesla Options Trade Ideas with Erik from Outlier Trading.

This post summarizes a conversation from April 2026 and is educational only. Options trading involves substantial risk.