If you want to short Tesla shares, you need a derivatives broker like IG, City Index or Saxo that offers CFD trading or financial spread betting. In this guide we go through the main ways you can short Tesla stock to try and profit as the share price goes down and highlight some of the key risks of going short.
There are three main ways to short Tesla shares from the UK
- Contract for differences
- Financial spread bets
- Equity options
CFDs or Contracts for Difference allow traders to speculate on the rise and fall of a stock price without the need for ownership of the underlying instruments. CFDs are leveraged, cash settled and non-deliverable, which means that you can trade on both the long and short side with equal ease.
Spread Bets are similar to CFDs in that they allow traders to speculate on changes in a share price without taking ownership of the stock., they are also cash settled and non-deliverable, but unlike CFDs, the contracts are structured as bets not trades and therefore any profits don’t incur capital gains tax under current legislation, for UK taxpayers.
Options are a type of derivatives contract that provide buyers with the right to buy or sell a security, at a fixed price during a known time frame, of say 1 week, one month or one quarter. Call options offer the right to buy, Put options offer the right to sell.
Options can be bought or sold however selling options entails a very different risk profile to buying them, As a rule of thumb, you shouldn’t trade options unless you understand how they work and what you are doing when trading them. On the plus side, if you only buy options, then you have a predefined maxim loss from the outset which is limited to the option premium you pay.
Further reading:
Why are traders interested in shorting Tesla stock?
Tesla TSLA US, is something of a marmite stock, this bipolar approach to the stock among investors can be attributed to several factors. After all, the company helped kickstart the EV revolution, and at the same time, it launched products in solar and household energy, battery technology, EV charging, grid scale electricity storage, and so-called Giga factories.
Against that, Tesla’s valuation relative to the rest of the automobile industry has been hard to stomach.
As this quote from Newsweek in December 2024 illustrates:
“With a market cap of around $1.46 trillion, it is more valuable than the 35 next-biggest automakers, which, combined, have a total value of approximately $1.42 trillion”
For comparison, Tesla sold fractionally more cars in 2024 than VW at 1.79 million units vs 1.67 million at Volkswagen.
Of course, the other wild card associated with Tesla is Elon Musk, the world’s richest man and CEO of the firm, who is never far from controversy, particularly since taking up his new role within the Trump administration.
Over the last 5 years Tesla’s stock price has rallied by more than +680.0%.
However, the stock price is now well off the top, in fact it’s fallen by almost -30.0% year to date and is now almost -42.0% below its 5-year high.
And, in the last month alone, it’s posted 11 consecutive new lows and has underperformed the broader S&P 500 by almost -29.0% year to date.
Is shorting Tesla stocks a good idea?
Shorting stocks is theoretically riskier than trading on the long side, simply because by being short of a stock you face the potential of an open-ended loss.
That’s because there is no theoretical upper bound to the stock price, the possibility of incurring an open ended loss in a short position is admittedly very small but the risk does exist.
That doesn’t mean you shouldn’t short stocks, it just means you need to be aware of these risks, but in that respect it’s no different to any other trade.
At the time of writing, Tesla has had a big fall already, however, a break below $276.00 could see the price fill a gap in the chart around $265.0 and from there $240.00 wouldn’t look out of the question.
Of course, filling the gap might turn out to be the catalyst for a bounce.
Is there a fund that shorts Tesla?
There are Inverse Single Name ETFs that short Tesla shares, such as the Leverage Shares -1x Tesla ETF, that trades under the ticker TSLS in London.
The ETF moves inversely to the price of Tesla, such that if the price of Tesla falls in value, then the ETF will rise in value. By buying the fund, you are backing the value of Tesla to fail and the value of the fund to rise.
Year to date TSLA has risen by + 35.16% and the fund can be traded in US dollars, Sterling or Euros.
There are also leveraged versions of the Short Tesla ETF, for example, the -3x Leveraged Short Tesla ETF, which will move at three times the rate of Tesla stock. Such that if Tesla stock falls by -$5.00 then the -3x short ETF should rise in price the equivalent of -$15.00.
Once again please note that these are complex derivatives that are only really suitable for day or short term trading, and not for long term or buy and hold strategies, not least because they have daily resets.
Did Bill Gates try to short Tesla stock?
Bill Gates, the founder of Microsoft, is also one of the richest men in the world who several years ago used some of his wealth to take a significant short position in Tesla stock. He was thought to have sold the stock at around $250.00 per share and closed the position somewhere around $441.0. Resulting in an estimated loss of $1.50 billion, and whilst that’s a significant amount of money, it’s a fraction of his net worth of $108.90 billion.
Bill Gates may have had the right idea but the wrong timing for his short trade in Tesla, timing is especially important when shorting and never more so when shorting stock that is often driven by sentiment rather than fundamentals, which means even when the price “should “ go down it doesn’t always play ball.
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