Shorting Tesla Stock in 2023
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Introduction: Navigating the Tesla Rollercoaster in 2023
In the ever-evolving landscape of the stock market, few companies have captured the world's attention quite like Tesla (TSLA). With CEO Elon Musk at the helm and a mission to accelerate the world's transition to sustainable energy, Tesla Inc. has become a symbol of innovation and disruption. But as the adage goes, what goes up must eventually come down, and this sentiment often rings particularly true in the realm of stock trading.
The 2023 has proven to be a pivotal year for Tesla, marked by remarkable highs, perplexing lows, and relentless speculation so far. As investors grapple with diverging views on the electric vehicle (EV) giant's future, the question arises: Is it time to explore the world of short-selling Tesla stock?
In this comprehensive guide, we embark on a journey to uncover everything you need to know about shorting Tesla stock in 2023. Whether you're a seasoned trader looking to expand your portfolio strategy or an investor planning your world of investing, we'll equip you with the knowledge, insights, and cautionary tales to make informed decisions in the face of this electrifying opportunity – or potentially electrifying downfall.
Understanding Short Selling
Short selling is a financial strategy that allows investors to profit from falling asset prices. Unlike traditional investing, where one buys low and sells high, short selling operates on the premise of selling high and buying low. In this method, an investor borrows shares or assets (typically stocks) from a broker and then sells them on the market at the current market price, with the expectation that the asset's price will decrease. After the asset's price falls, the investor repurchases the same number of shares in the market at the reduced price, returning them to the broker and pocketing the difference as profit.
For instance, consider an investor who believes that Tesla Stock, currently trading at $100 per share, is overvalued and will decline. They borrow 100 shares of Tesla from their broker and sell them for a total of $10,000. Later, if Tesla's stock falls to $80 per share, the investor buys back 100 shares for $8,000, returns them to the broker, and keeps the $2,000 difference as profit.
However, it's important to note that if the stock price rises instead, the investor may face potential losses, as they would need to buy back the shares at a higher price. There are various financial instruments investors can choose to buy or sell stocks and contracts. Investors can also short single stocks or Tesla in this case through Exchange Traded Products (ETPs). Leveraged ETPs offer up to 3-times leverage on the stock. Investors can check out Graniteshares 3x Short Tesla ETP
Tesla in 2023 So Far
In 2022, Tesla plunged roughly 65% of its stock value (source: The Street). Reignited investor interest in 2023 following a robust recovery in its stock led by several factors including a series of aggressive price cuts on various Tesla cars and improving macroeconomic conditions as well as a broader market rebound. Tesla's Model 3 and Model Y vehicles are eligible for full federal tax credit has also been a key reason for investor optimism in 2023 so far.
Apart from that, Tesla has been one of the huge beneficiaries of the AI boom. Moreover, Elon Musk's decision to step down from the CEO role at Twitter to focus on Tesla again has been a positive light for the company. Year-to-date the car maker has grown around 140%, recovering from a dramatic drop in the stock in 2022.
The Earnings and the surge in prices have been because of the monthly price cuts which have affected the carmaker's margins. Apart from that, numerous competitors are entering the EV space which could lead to further dilution of Tesla's gross margins. In the long term, these lofty price valuations may be not sustainable. There are various risk factors to consider for the future of Tesla's growth.
Short Interest and Short Squeeze Potential
Short interest refers to the total number of shares sold short by investors, a closely watched metric for volatile stocks like Tesla. High short interest indicates many investors are betting against the stock, anticipating a price drop due to concerns like valuation or competition.
A short squeeze occurs when a stock's price surges, often due to positive news or strong demand, compelling short sellers to buy back borrowed shares. This rush can drive prices even higher, creating a feedback loop. In Tesla's case, its high short interest makes it susceptible to short squeezes, potentially leading to sharp price spikes.
Conclusion
In 2023, shorting Tesla offers potential rewards but carries substantial risks. While concerns about overvaluation, competition, or regulatory shifts may tempt investors to short, it's vital to remember the peril of unlimited losses and the unpredictability of markets. Effective risk management, including stop-loss orders and diversification, is paramount. Tesla's trajectory hinges on a complex interplay of factors and shorting should be approached cautiously by seasoned investors with a keen understanding of the risks involved. Stay vigilant, adapt to changing conditions, and, if needed, seek professional guidance to navigate this challenging terrain.
Short Tesla ETPs by GraniteShares
Short Tesla ETPs by GraniteShares
| Product name | Ticker | ||
|---|---|---|---|
| USD | EUR | GBX | |
| 3STS | 3STE | 3STP | |
| 3LTS | 3LTE | 3LTP | |
| 3SFT | 3S3E | 3S3P | |
| 3FTG | 3FTE | 3FTP | |
| FTNG | FTNE | FTNP | |
| SFTG | SFTE | SFTP | |
DISCLAIMER
This is a disclaimer stating that all trading and investing comes with risks. Always do your research and do not invest more than you can afford to spend.
GraniteShares accepts no responsibility for any loss or damage resulting directly or indirectly from the use of this blog or the contents. GraniteShares Limited (“GraniteShares”) (FRN: 798443) is an appointed representative of Messels Limited which is authorised and regulated by the Financial Conduct Authority.
This blog does not constitute an offer to buy or sell or a solicitation of an offer to buy securities in any company. Nothing contained herein constitutes investment, legal, tax or other advice nor is to be relied upon in making an investment or other decision. No recommendation is made positive or otherwise, regarding individual securities or investments mentioned herein. Any summary list of risk factors does not purport to be a complete enumeration or explanation of the risks involved in a particular investment. Prospective clients must consult with their own legal, tax and financial advisers before deciding to invest. This email contains the opinions of the author and such opinions are subject to change without notice. The source of data is GraniteShares unless otherwise stated. No guarantee is made to the accuracy of the information provided which has been obtained from sources believed to be reliable. This email and the information contained herein is intended only for the use of persons (or entities they represent) to whom it has been provided. Past performance is not a reliable indicator of future results. The value of an investment may go down as well as up and can result in losses, up to and including a total loss of the amount initially invested. Investments may involve numerous risks including, among others, company risks, general market risks, credit risks, foreign exchange risks, interest rate risks, geopolitical risks and liquidity risks. Please note that GraniteShares short and leveraged Exchange Traded Products are for sophisticated investors.
