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I have, much to my dismay, learned enough about stock trading to explain how to bet against Tesla as an individual, with your own money. Doing this can put downward pressure on Tesla’s stock price and hurt the company. (And if, like me, you’re betting that Tesla is grossly overvalued and #TeslaTakedown will hit it hard, then this might actually make you money — but don’t count on that!)
I’ll share what I’ve learned in a thread here. I hope it helps others, and I hope people with actual expertise will correct me if I say anything wrong.
1/
Here’s the brief version:
- You can buy something called an “inverse ETF” to bet against a company.
- You can lose this way, but not more money than you put in.
- The inverse ETFs for Tesla are TSLS, TSLQ, and TSLZ.
- Holding on to them hurts Tesla.
- To buy them, you need a brokerage account, and it needs to let you buy inverse ETFs.
- Anyone can open a brokerage account. It’s a nuisance and it takes 3+ days, but it’s ~free.
And:
- A large number of people doing this each with a small amount of money would have a real effect on Tesla.
2/
Like me, you’ve probably heard of shorting stock as a way of betting against a company. Everything I’ve learned about this says: DON’T. This is like learning to snowboard by doing jumps off a rocky cliff. You will hurt yourself badly.
The details are complicated, but the short of it (pun intended) is that you can actually lose •more• money than you put in. And there’s no limit to how much shorting can put you in debt. Don’t.
Especially don’t if you’re extra smart, because you’ll just figure out how to hurt yourself worse.
3/
Fortunately, there’s this thing called an “inverse ETF” that lets you bet against a company without that risk. Again, details are ridiculously complicated, but basically it acts like a normal stock that moves in opposite proportion to some other stock.
The important thing here is that is puts downward price pressure on a stock — i.e. it hurts that company’s investors — without the possibility of you losing more money than you put in.
Inverse ETFs for Tesla are TSLZ, TSLQ, and TSLS.
4/
Inverse ETFs are not a good investment choice unless you really, really believe than a company’s stock price is going to go down. And investment guides tell you that you shouldn’t normally hold them for more than a very short period.
AFAICT, that’s because •running• an inverse ETF is costly, and the people who run them past those costs on to inverstors. So they tend to lose money long term unless the stock •keeps• going down and down and down and down.
But if you actually think a stock is going to do that, well….
5/
If you think Musk is bad news, if you want to bet against Tesla, and if you have a little money to do that, here’s the tactic:
- Buy TSLQ, TSLZ, and/or TSLS.
- Do •not• put in more money than you’re willing to lose. Expect that you’re kissing your money good-bye when you buy those ETFs. If your bet pays off, lucky you! But don’t spend your life savings on this, for heaven’s sake.
- Hold, hold, hold until Musk is completely kicked out of either Tesla or the government.
6/
@inthehands the one thing that gives me pause is the amount of mutual funds and 401ks (not to mention pension funds) that have massive exposure to TSLA. When the TSLA bubble pops, the sound will be deafening
The managers of my retirement fund have sent around notices lately about how they are acting to reduce the risk to everyone's money during the current crisis.
Including specific discussions of Nvidia and Tesla.
And what did they say? Anything intelligible?
Paraphrasing:
"No, we will not try to short these stocks. That would be irresponsible."
Fair, and surely correct on their part! But have they sold? Will they?
@inthehands @michael_w_busch I imagine institutions have been quietly selling while the Muskovites have been “buying the dip”