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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/
If like me you need to open a brokerage account, Fidelity or Charles Schwab seem like credible choices. (Steer clear of Robinhood and most other investment apps.)
If you already have a retirement account, you might be able to open an brokerage account there too and save yourself minor hassle — but make sure they actually like you buy inverse ETFs (TIAA does not, for example).
If you have a SEP-IRA, it may let you trade inverse ETFs without needing a separate brokerage account (but see warning above about not betting money you can’t afford to lose).
7/
If you open a brokerage account, expect minor hassle spread over 3+ days. You have to fill out forms online, verify your bank account, transfer money in, yada yada. They walk you through the process. Just expect lots of waiting.
I personally do not trust the thing where you log into your bank account through the brokerage’s web site. Yikes. I used direct deposts to verify my account, which took 3 days but feels like a lot less of a security YIKES to me.
8/
Once you have your brokerage account:
- Transfer that small “I’m willing to lose this much” amount into your brokerage account
- Buy TSLZ, TSLQ, and TSLS.
- Hold on to it. Don’t even pay attention to it going up and down unless you’re a glutton for punishment.
- (And maybe just do •not• do any of this if you know you have a gambling addiction. You will be tempted to put in more than you should.)
9/
I put in just a few hundred dollars, an amount I’m wiling to sacrifice. I think Tesla’s in deep shit and this might actually make money, but it’s a moonshot.
Regardless of whether I personally make money, this signals to the market that I think Tesla is overvalued and likely in serious trouble. That hurts Musk, whose power and wealth is directly tied up in the huge amount of Tesla stock he owns — and in people believing he’s some kind of magical golden child who will turn Tesla into a money unicorn with his galaxy brain.
10/
@inthehands
Except Musk seems to be trying to get money out of Tesla in the form of CEO compensation, not shares?
Edit: as pointed out down-thread, that CEO compensation package is also in Tesla shares (options)
@sabik Tesla shares account for some absurdly large portion of his wealth — I forget the exact percentage, but it’s large, like almost half-ish? — to the point where he might not be able to handle the amount of debt he’s carrying if the share price goes down too far. (He’s used Tesla shares as collateral on other loans.)