I'm not ready to start selling down my Tesla position for retirement income. So I am framing the objective this way:
Hold onto as many Tesla shares as possible while doing the following:
1) Diversify investments
2) Pay off mortgage and other debt
3) Cover living expenses
While I am working, I have an income to fund the three items plus buying more Tesla shares. In retirement, I would need to cover about half of this from Tesla shares. So before retirement, it makes sense to working on how do diversify portfolio and pay down debt. If I can't or don't want to do that, I'm probably not ready for retirement.
Obviously, one can sell shares to meet these objectives, but this reduces the number of shares one holds. So short of that, I think about writing covered calls on my Tesla shares. This, of course, puts some of my shares at risk, but for the time being I might just as well cover that with cash. So essentially, what I am doing is renting out my shares (as collateral against call options) and sacrificing some of the upside potential. In practice, I would sell covered calls and invest the proceeds. This raises capital for the duration of option. I could use this capital to diversify my portfolio, or I could reinvest in shares of Tesla so as to boost my total share holding. Eventually I do need to close the call. Depending on how deep in the money the options are I may need to sell some of the investments or Tesla shares. When I am writing covered calls I select strikes which are well out of the money so as to minimize the risk of losing shares, but this means generating less cash.
So I think of writing covered calls as a kind of virtual dividend derived from the value of my shares. I can elect how big my dividend is, but the bigger it is the more upside I am selling off and the more I erode my share position over time. But options do tend to lose value over time, so writing calls should erode my share position less than simply selling off a few shares at a time. Also note that as my shares grow in value over time, I will be able to write options with higher cash value.
Right now, I am not writing covered calls because I don't need the cash and I believe there is pretty strong upside potential to Tesla shares. But I am also not retired, so I have more latitude to allow my Tesla position to grow.
