Ah, Tesla. From the bottom end of the stock market to its present throne amongst the champions, Tesla has had quite the ride. This makes it prime pickings for a short stock option. Thinking about how to short Tesla stock? You’re certainly not the first! In fact, it’s been one of the most shorted stocks on the market!
But, is it the best thing to do? Is it a smart thing to do? If you’re reading this post, you likely have the below questions…
- What does it mean to short the Tesla stock really?
- How do you short Tesla stock?
To answer these questions you’ll want to consider the history of Tesla stock, how much Tesla stock will be worth in 10 years, and beyond.
You should also become very familiar with the best ways to short a stock. Lucky for you, we’ve got you covered in this post! Let’s dive in and start at the beginning of the Tesla stock journey.
Only 12 years ago, Tesla was on the verge of bankruptcy (for real!)
Back then, they were the laughing stock of the stock market world, and hardly anyone wanted to own Tesla stock. It was frequently shorted. They only narrowly survived the 2008 financial crisis.
But Tesla’s goals were simple…
Produce a High Margin Electric Performance Vehicle
The first was to start with a high margin, high performance sports car. This car was for wealthy people, which Tesla hoped would make the public want electric vehicles.
Big celebrities drove this car, and because of that success, within a year they decided to IPO and put Tesla onto the stock market.
Make Cool Electric Cars Available to the Masses
Their next goal was to sell Tesla cars to the mass market, so everyone could drive an electric vehicle. When delivery started to ramp up, so did their stock, which climbed over 200%.
Then they released the Model 3, which was way more affordable for the public, and it sent shockwaves – they had $14 billion in sales the first week!
Over the next year Tesla was so far ahead of the competition, it raised their stock over 100% more.
In January 2020 Tesla was valued at $117 billion, and by December of the same year, it had skyrocketed to $658 billion. Less than a year later, in October of 2021, it reached a $1 trillion market cap.
What Made Tesla Stock So Hot?
So what happened?
The pandemic, the reality of climate change setting in, and what Elon Musk tends to say in public all contributed to the valuation climbing.
The more people talk about Tesla, what their vision is for it, whether its Elon Musk or people who just love Tesla, the buzz grows and the price rises.
But really, a lot of the meat for Tesla’s financial products comes from the vision of a future where electric vehicles, solar power, and sustainable energy rule supreme.
What Does it Mean to Short the Tesla Stock?
“What goes up must come down.”
Gravity pertains to apples…and the saying also pertains to companies. No company will last forever.
- Companies are born,
- they rise,
- and then they fall.
It’s the natural progression of life and companies alike.
So, many people are talking about shorting Tesla. But what does that really mean?
Short selling is a way to make a profit off a stock losing value.
It is a high risk, but high reward method, and really isn’t for beginner investors.
In the simplest terms, an investor borrows stock shares and sells them on the market at fair market value. When it’s time to buy those borrowed shares, the investor is betting the stock will have gone down in price, meaning they can buy them back at a lower price, resulting in a profit.
An example: How to short Tesla shares
Shorting is a bit tough to understand, so here’s some real numbers around how to short Tesla shares:
- Tesla is trading for $860 right now. Let’s say you think it’s really only worth $700 a share and the price will soon go down.
- So, you borrow the shares and sell them to someone else for $860. You pocket that money.
- You eventually need to buy the shares yourself since you can’t just borrow them forever (especially since you sold them already!). So, let’s say a month goes by and the stock is now worth just $760. You can choose to buy those shares that you were borrowing (and sold) and complete the entire transaction.
- You just earned yourself $100 per share!
Seems easy, but keep in mind that a stock can go up in price theoretically forever, and the investor would have to buy them back at the higher price. In fact, there have been many investors that have shorted Telsa stock and lost time and time again!
Should I Short the Tesla Stock?
So what are our thoughts on this? Should you short Tesla stock?
If you’re a beginner investor, probably not.
If you really understand what you’re doing, you should look into the information and decide if it’s right for you.
Because Tesla has such a huge valuation, one that smashes every other car company, it’s one of the most shorted stocks on the market. But Tesla isn’t just a car company. They’ve stated the next goals for Tesla are with solar roofs and batteries, expanding electric vehicles beyond just cars, and developing self-driving capability.
Tesla Stock Predictions 2025
Tesla is currently priced at $860. Predictions for Tesla stock by 2025 are between $1600 and $3000 per share.
How Much Will Tesla Stock Be Worth in 10 Years?
What about a decade from now? How much will Tesla stock be worth in 10 years?
Believe it or not, the stock is expected to rise to as much as $10,000 per share.
All estimates are speculative. No one really knows what the stock price will be in 10 years…BUT, these estimates don’t make it look like the best option for shorting.
There are many heated debates about whether or not Tesla can hold its market share among car companies – with some arguing there’s no way Tesla can keep its momentum and others arguing that their business isn’t just about cars, and is poised to continue its explosive growth.
To answer the question, “Should I short Tesla stock?” …you really have to decide which side of the coin you’re on.
Is There a Tesla Short Stock?
Maybe you’re still not to sure how to actually short the Tesla stock (that instruction is coming later in this article by the way). Maybe there’s a stock you can buy that’s set up to profit from Tesla going down in value. In other words, you’re asking the question, “Is there a Tesla short stock?”
Spoiler alert – yes, yes there is.
As of December 31, 2021, there were 26 million shares short of Tesla stock. As stated, Tesla is one of the most shorted stocks on the market.
- There’s a Tesla Short ETP (Exchange-traded Product) in the UK called GraniteShares 3x Short Tesla ETP.
- Also available on the European market are Leverage Shares 2x Tesla ETP and Leverage Shares 1x Tesla ETP.
Is Tesla in a Short Squeeze?
Ever hear of a short squeeze? If so, you might be wondering if Tesla is in a short squeeze.
A short squeeze happens in a couple of ways:
- First, if a lot of people start shorting a stock and actual buy and sell trading falls, it makes it harder for the short sellers to buy back the stock they borrowed.
- Second, if the price of the stock goes up, short sellers might start panicking and quickly buying back all the shares that they sold short. With all these people buying, the price rises, which causes more panic buying, and so on.
So is Tesla in a short squeeze?
Not right now.
People aren’t shorting it as much, and buying and selling Tesla is at an all-time high.
However the price is being predicted to continue its meteoric rise, so depending on how quickly it shoots up, you might see a short squeeze from panic buying. But for right now, no, Tesla is not in a short squeeze.
First, you’re probably wondering how to short a stock. And then more specifically, now to short a Tesla stock.
The first thing you’ll need to do is set up a margin account with whatever brokerage you’re at.
Margin accounts allow you to borrow shares from your brokerage. You usually need enough in your margin account to cover whatever losses might come from shorting. I usually don’t recommend borrowing, but if you want to short a stock this is how you need to do it.
How to Short Tesla Stock With Options
Shorting a stock with options is called “placing a put option”.
When you’re shorting with options, you can exercise your trade either on or before your contract expires.
For example, a put option on 50 shares of a stock that’s valued at $20, then the price drops to $10, you can exercise your put option to make money. If the stock price doesn’t go the way you want it to, you can “opt” not to go through with the contract. Shorting with options gives you…options.
You’ll have to be very diligent in finding the method that works for you.
How to Short Tesla Stock With ETFs
Another simple way you could short Tesla stock is to buy foreign shares of the Tesla Short ETFs.
You can buy Tesla Short ETFs, however if you’re looking to truly short the Tesla stock yourself, you may want to look into some of the top brokerage accounts to do it. Let’s look at how to short Tesla shares on Robinhood and TD Ameritrade.
How to Short Tesla Stock on Robinhood
This one is kind of surprising, but you currently can’t short Tesla stock on Robinhood.
Robinhood is a great investment tool for many things, but not shorting Tesla stock.
How to Short Tesla Stock on TD Ameritrade
So what about TD Ameritrade? Can you short Tesla stock on their platform?
Yes, you can!
Here’s how you can set up a short on the Tesla stock:
- Enable margin trading in your account
- Make sure you have at least $2000 in your account – this is the minimum allowed to help cover losses
- Wait approximately 3 business days for your margin trading account to be active
- Enter an order, in this case Tesla, and indicate that you’re short selling
- Complete your transaction
The best advice when it comes to shorting a stock is to do so within your means, making sure you have enough to cover potential losses and that you repay your loan quickly and on time.
Also remember you need to understand what shorting is, and know your own risk tolerance.
If you want all the various options of shorting a stock, those are found in the options listed above. Choose the option that works best for you!
How to Short Tesla Stock – Should You Do It?
Now that you understand how to short Tesla shares – should you?
When you read about the journey of the Tesla brand and how it’s performed in the stock market you can see that it’s been both a good short and not the best option to short.
When you research the company, you can see there are two camps – those who think the Tesla bubble will burst, and those who think it’s growth is in the most profitable areas of the future. You’ll also want to consider how comfortable you are with shorting, and how much investment knowledge you have.
No one can definitively say yes or no, but with the information that you have, what do you think? Is shorting Tesla a good idea?
AUTHOR Derek Sall
Derek has a Bachelor's degree in Finance and a Master's in Business. As a finance manager in the corporate world, he regularly identified and solved problems at the C-suite level. Today, Derek isn't interested in helping big companies. Instead, he's helping individuals win financially--one email, one article, one person at a time.