r/investing
Covered Call LEAPS Strategy on Bloom Energy (BE) – Am I Crazy or Is This Solid?
User proposes a LEAPS covered call strategy on BE, buying shares at $250 and selling $480 calls for 2028 to lower basis.
- The strategy generates significant upfront premium income, effectively lowering the break-even price to $150 per share.
- It offers a defined maximum return of ~132% over five years if the stock exceeds the $480 strike price.
- The long-dated expiration allows ample time for Bloom Energy's growth thesis in AI power demand to play out.
- The analysis relies on an incorrect current share price of $250, which is significantly higher than actual market levels, invalidating the specific trade mechanics.
- Selling deep out-of-the-money calls caps the upside potential, preventing participation in any exponential rally beyond $480.
- Capital efficiency is low as $250k is tied up for five years with limited liquidity compared to other income strategies.
I’ve been thinking through a longer-term income + upside strategy and wanted to get this sub’s take before I put real money behind it.
The trade I’m considering:
- Buy 1,000 shares of Bloom Energy (BE) at \~$250/share
- Total cost: \~$250,000
- Sell 10 covered call contracts (fully covered)
- Expiration: June 2028
- Strike: $480
- Premium: \~$100 per share ($10,000 per contract / $100,000 total)
What this looks like mechanically:
- I collect $100,000 upfront in premium
- That effectively lowers my net cost basis from:
* $250 → $150 per share
If BE is above $480 by June 2028:
- Shares get called away at $480
- Profit per share:
* $480 - $250 = $230 stock gain
* $100 premium
* = $330 total gain per share
- Total max profit:
* $330,000 on $250,000 capital (\~132%)
Yes definitely do it. No one ever loses money on options.
that's a pretty interesting way to lock in some serious premium upfront and drop that cost basis right out of the gate. i usually don't go out to LEAPS for covered calls myself, tending to stick to shorter DTEs to milk that theta decay, but you definitely grabbed a fat net credit there. i'd be tracking that cost basis and overall p&l super closely on ThetaPal given the multi year timeline. what made you pick BE specifically for such a long play?
I'd be very careful with this. A few risks that stand out:
- BE is at $253 with negative EPS (-$0.05), 58x trailing P/E, and a beta
of 3.75. The 52-week range is $20.93 to $322.83 — this stock has insane
volatility. It went from $21 to $323 in one year.
- If BE drops, you're holding $250K of stock with no protection. The $100K
premium cushions a drop to ~$150, but below that you're taking full
losses. At this stock's volatility, a 40%+ drawdown is plausible.
- The $480 strike is 91% above current price with 2 years of time — that's
a lot of Vega. If the stock pulls back, the call premium collapses and
you lose the ability to manage the position.
- The "effective cost basis" math ($150/share after premium) is misleading
because it ignores that you could lose the full $250K on the long side
while keeping only the $100K premium.
A more capital-efficient approach might be a risk-defined spread instead
of a naked covered call on a 3.75-beta stock.
I see this all the time and need to give you a quick hint here so you stop thinking this way
What this looks like mechanically:
* I collect $100,000 upfront in premium
* That effectively lowers my net cost basis from:
* $250 → $150 per share
No, it doesn’t.
What tax bracket are you in? You are taxed on the income from the $100k options sale. So it’s $60-75k that you’re gonna retain.
It only lowers your cost basis to $175 or $190 per share, not $150.
And what if it goes down?
Bloom Energy is trading at 30x sales...a company that has 30% gross margins.
They would have to quadruple (+300% increase) their revenue from here just to get to 30x price to gross profit...and that doesn't even account for operating expenses.
Even if they doubled their revenue - heck, let's say more than that to $5 billion, they could trade at 30x gross profits and be worth $150 per share. And this all assumes that these numbers are sustainable forever.
Idk man. This is all just getting very silly
You dont think their product is scalable?
Look at how one paused order is tanking the stock 80 dollars in a week.
Do you like to gamble and dont care if you lose money? If yes, you do you.
I would post in r/trading \- you'll get more exposure to people who are active options trader.
It looks like I'm not active enough to be able to post there yet. I would like to get their opinion though. Thanks for the advise.
Congratulations, you have discovered covered calls.
Now, what happens if Bloom Energy goes back to $120 (where it was 2 months ago)?