What Is the Tesla ETF (TSLQ)?

Investors who want to bet against Tesla Inc. stock without having to buy derivatives like futures or options may consider AXS TSLA Bear Daily ETF (TSLQ), which is a -1x inverse ETF, or they may consider other Tesla ETFs.  

Single-stock ETFs carry unique risks, which means investors should learn how they work before buying shares. 

How Do Single-Stock ETFs Work? 

A single-stock leveraged ETF is an exchange-traded fund that uses derivatives to amplify returns or to provide inverse exposure to highly traded individual securities. For example, the Direxion Daily AAPL Daily 1x Shares ETF (AAPD) is an inverse single-stock ETF that provides -1x exposure to Apple stock.

For example, if an investor owns AAPD and Apple stock falls in price by 1% during daily trading, AAPD would be expected to rise in price by 1%. Keep in mind that the opposite is also true, where AAPD would fall in price if Apple shares rose in price.  

Not all single-stock ETFs have inverse strategies. Some also use leverage to amplify the return of the underlying target stock. For example, the Direxion Daily AAPL Bull 1.5X Shares ETF (AAPU) is designed to amplify the return of AAPL stock by 1.5 times. So, if AAPL stock rises by 1% in a day of trading, AAPU would be expected to produce a 1.5% return. 

What Is the TSLA Bear Daily ETF? 

TSLQ, which launched in July 2022, is a single-stock exchange-traded fund that seeks to produce the inverse daily performance of Tesla stock. Like other inverse ETFs, TSLQ attempts to deliver positive returns when its benchmark produces negative returns.  

For example, since TSLQ is a -1x inverse ETF, it would be expected to produce the opposite return as TSLA on any given day of trading. So, if TSLA were down -1%, TSLQ shareholders could expect a 1% gain on that trading day.  

Put simply, TSLQ and other inverse ETFs are designed to enable investors to make money when the benchmark, in this case, TSLA, declines. Investors should keep in mind that the opposite is also true, where TSLQ would fall in price if Tesla shares rose in price.  

TSLQ has an expense ratio of 1.15%, which makes it expensive for an ETF. Assets under management, as of December 6, 2022, were $56.41 million, which is small for an ETF. Lower AUM often translates to low volume, which can be a disadvantage for investors because it can make bid/ask spreads wider. 

Tesla Single-Stock ETFs 

Investors should note that TSLQ is not the only Tesla single-stock ETF on the market, nor is it the only single-stock ETF on the market. Single-stock ETFs attempt to produce returns in the opposite direction of its target stock.  

There are inverse ETFs that rise in price if TSLA falls, and there are leveraged ETFs that amplify the price of TSLA on the upside.  

Single-stock Tesla ETFs on the market include: 

• AXS Daily Bear Tesla ETF (TSLQ) provides inverse (-1x) exposure, less fees and expenses, to the daily price movement for shares of Tesla stock. 
• Innovator Hedged TSLA Strategy ETF (TSLH) is an actively managed ETF that uses options to provide the price return of Tesla stock, up to a cap, while hedging the downside risk over a three-month period.  
• Direxion Daily TSLA Bull 1.5X Shares (TSLL) provides 1.5x leveraged exposure, less fees and expenses, to the daily price movement for shares of Tesla stock. 
• Direxion Daily TSLA Bear 1X Shares (TSLS) provides inverse (-1x) exposure, less fees and expenses, to the daily price movement for shares of Tesla stock. 

Bottom Line 

Tesla stock fell in price by nearly 50% through December 6, 2022, increasing interest in inverse single-stock ETFs, which rise in price if TSLA falls in price. Investors who want to profit from a decline in Tesla stock prices without having to buy derivatives may consider the TSLQ, which is -1x inverse ETF. Investors should keep in mind that single-stock ETFs carry higher market risk than traditional ETFs.