Tesla Twists Showcase Single-Stock ETF Risk/Reward

Leveraged and inverse ETFs may primarily be the domain for hungry day traders.

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Jeff_Benjamin
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Wealth Management Editor
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Reviewed by: etf.com Staff
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Edited by: Ron Day

The risks and rewards of new-breed single stock ETFs were on display this week thanks to the zigging and zagging in Tesla Inc. shares.

The electric carmaker jumped by more than 4% Friday, retracing some of the 11% decline Thursday that was sparked by impressions that the company is struggling to keep up with lofty artificial intelligence development plans.

For anyone owning the stock directly or as part of a long-only exchange-traded fund, this translates into more volatility for the high-profile stock that only recently emerged from a deep valley to reach the breakeven point from the start of the year.

But for fans of the suddenly popular single-stock ETFs, Tesla’s wild ride has been amplified in ways that should remind investors and financial advisors how leverage can cut both ways.

Leveraging Tesla Stock’s Wild Ride

Consider, for example, the T-Rex 2X Inverse Tesla Daily Target ETF (TSLZ), which offers a doubled-downside bet on Tesla stock and resets daily.

The downside bet on Thursday when news was breaking about Tesla’s potential AI issues, which raised questions about the stock’s 77% rally over the past three months, resulted in a 20% one-day gain for TSLZ.

That’s good news for anyone aggressively betting against Tesla on Thursday. But by midday Friday, TSLZ was already down nearly 7%, underscoring the double-edged blade of these single-stock ETFs.

For starters, the leverage always resets at the start of each trading day, which means they are designed for traders and not buy-and-hold investors.

For a sense of how the double-edged blade works with these strategies, there is the T-Rex 2X Long Tesla Daily Target ETF (TSLT), which doubles the bet on the long side of Tesla stock.

Perhaps not surprisingly, TSLT declined by more than 25% on Thursday, before it rallied by more than 5% in morning trading Friday.

Any issuer of single-stock ETFs will acknowledge the strategies are designed for traders, but it’s also no accident that every single-stock ETF introduced over the past two years since the SEC first approved them has been pegged to a high-profile and potentially volatile underlying security.

And unlike some old-school areas of the ETF space where being first to market was the only way to succeed, issuers of single-stock ETFs have no problem sharing shelf space with identical products.

The T-Rex versions, for example, launched in October 2023, two months after the GraniteShares 2X Short TSLA Daily ETF (TSDD) and the GraniteShares 2X Long TSLA Daily ETF (TSLR).

And both those issuers were a year behind the August 2022 launch of the Direxion Daily TSLA Bull 2X Shares (TSLL) and the Direxion Daily TSLA Bear 1X Shares (TSLS).

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.


Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.


Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.