ETF Stock Trading

Inverse ETFs are financial instruments that allow investors to profit from declines in specific stocks or indices without directly short-selling them.

For those interested in betting against Tesla’s stock performance, several inverse ETFs are available. Let’s explore how these work and what they offer.

What Are Inverse ETFs?

Inverse ETFs are designed to move in the opposite direction of their underlying asset or index. They use derivatives like futures contracts, options, and swaps to achieve this inverse performance. For example, if Tesla’s stock falls by 1%, an inverse Tesla ETF would ideally rise by 1% on that day.

How Do Inverse ETFs Work?

1. Derivatives-Based Strategy: Inverse ETFs enter into agreements with counterparties through swaps or options to track the daily performance of Tesla stock but in the opposite direction.
2. Daily Rebalancing: These ETFs reset their holdings daily to maintain their inverse exposure. This means they are best suited for short-term trading rather than long-term holding.

Inverse ETFs for Tesla Stock

AXS TSLA Bear Daily ETF (TSLQ)

TSLQ provides -1x inverse exposure to Tesla’s daily performance, meaning it rises when Tesla falls. It’s designed for traders who want to profit from Tesla’s declines without using leverage. it has faced significant price volatility and has been issued sell signals from both short and long-term moving averages¹.

Key Metrics:

• Expense Ratio: 1.15% (relatively high for an ETF)²³.
• Assets Under Management (AUM): Approximately $327.25 million as of March 2025³.
• Dividend Yield: Indicated at 2.50%³.
• Performance: Recently gained 7.04% on March 28, 2025, but has fallen by 17.93% over the past 10 days¹.
• Volatility: High, with daily price swings of up to 13.02%¹.

Direxion Daily TSLA Bear 1X Shares (TSLS)

TSLS also offers -1x inverse exposure, similar to TSLQ but with potentially lower fees.

Key Metrics:

• Expense Ratio: Not explicitly listed, but typically lower than TSLQ.
• Assets Under Management (AUM): Not specified in the search results.
• Performance: Recently rose by 6.08% on March 26, 2025⁴.
• Investment Strategy: Seeks daily investment results of 100% of the inverse of Tesla’s daily performance using financial instruments like swaps and options⁴.

T-Rex 2X Inverse Tesla Daily Target ETF (TSLZ)

TSLZ provides more aggressive inverse exposure to Tesla, amplifying potential gains but also increasing risk. It’s suitable for traders with higher risk tolerance.

Key Metrics:

• Expense Ratio: Not specified in the search results.
• Assets Under Management (AUM): Not available.
• Performance: Offers -2x inverse exposure, meaning it aims to return twice the inverse of Tesla’s daily performance.
• Volatility: Higher than TSLQ due to its leveraged nature.

GraniteShares 3x Short Tesla Daily ETP (3STP)

Available in Europe, 3STP is the most aggressive option, providing -3x inverse exposure to Tesla. It’s best suited for short-term speculative trades and carries significant risk due to its high leverage.

Key Metrics:

• Expense Ratio: Not specified in the search results.
• Assets Under Management (AUM): Not available.
• Performance: Offers -3x inverse exposure, aiming to return three times the inverse of Tesla’s daily performance.
• Volatility: The highest among these options due to its triple leverage.

FAQs

What is the main difference between TSLQ and TSLS?

Both offer -1x inverse exposure to Tesla, but TSLQ has a higher expense ratio (1.15%) compared to TSLS. TSLQ also has more detailed performance metrics available.

How does TSLZ differ from TSLQ?

TSLZ offers -2x inverse exposure, meaning it aims to return twice the inverse of Tesla’s daily performance, whereas TSLQ provides -1x exposure. This makes TSLZ more aggressive and riskier.

What are the risks associated with GraniteShares 3x Short Tesla Daily ETP (3STP)?

The main risk is its high volatility due to triple leverage. It’s designed for short-term trading and can result in significant losses if Tesla’s stock rises.

What is the main advantage of using inverse ETFs over traditional short-selling?

Inverse ETFs allow investors to bet against a stock without the risk of unlimited losses associated with short-selling. They also don’t require a margin account and can be held in IRA accounts.

How do leveraged inverse ETFs work?

Leveraged inverse ETFs aim to provide multiple times the inverse performance of their benchmark. For example, a 2x inverse ETF would aim to return twice the inverse of Tesla’s daily performance. This amplifies potential gains but also increases risk.

Are inverse ETFs suitable for long-term investments?

No, inverse ETFs are designed for short-term trading due to their daily rebalancing mechanism. Over longer periods, their performance can deviate significantly from the expected inverse of the benchmark due to compounding effects.

What are the risks associated with inverse ETFs?

Risks include:

• Derivative Risks: Exposure to counterparty risk and complexities of derivatives.
• Compounding Effect: Performance over extended periods may not match expectations.
• Expense Ratios: Often higher than traditional ETFs due to derivative management costs.
• Volatility: Leveraged ETFs can be particularly volatile.

Practical Applications of Inverse ETFs

1. Hedging: Investors can use inverse ETFs to protect their portfolios against potential declines in Tesla stock.
2. Speculation: Traders can capitalize on anticipated short-term declines in Tesla’s stock price.

Final Thoughts

• Use with Caution: Inverse ETFs are not for everyone. They require active management and are best suited for experienced traders.
• Educate Yourself: Understand how derivatives work and the risks involved.
• Monitor Performance: Keep a close eye on your investments, as market conditions can change rapidly.

Conclusion

Inverse ETFs offer a unique way to bet against Tesla’s stock performance without directly short-selling it. While they provide flexibility and potential for profit, they also come with significant risks, especially for leveraged options. Investors should carefully consider these risks and use inverse ETFs primarily for short-term strategies.

Inverse ETFs can be powerful tools in the right hands, but they demand attention and a clear understanding of their mechanics and risks.