Tesla Inc. (TSLA) shares took a tumble in pre-market trading on Friday, dipping by almost 3%. This downward movement had a ripple effect on several inverse exchange-traded funds (ETFs) tied to Elon Musk’s electric vehicle giant, sending them on a similar rollercoaster ride.
According to Benzinga Pro, the Direxion Daily TSLA Bull 2X Shares (TSLL) experienced a 2.93% drop in pre-market trading, following a significant 43% surge the previous day after Tesla’s earnings announcement. However, the story wasn’t the same for all Tesla-linked ETFs.
The Direxion Daily TSLA Bear 1X Shares (TSLS), which had seen a 21.88% plunge on Thursday, managed a 1.10% rebound in pre-market trading on Friday. Meanwhile, the Tradr 2X Short TSLA Daily ETF (TSLQ), which had plummeted 43.93% post-earnings, saw a 3.40% increase in pre-market trading. The T-Rex 2x Inverse Tesla Daily Target ETF (TSLZ) also climbed 3.12% in Friday’s pre-market, after a 43.94% decline the day before.
These inverse ETFs are designed to profit from a decline in the value of an underlying asset, in this case, Tesla’s stock. They provide investors with a way to hedge against or speculate on stock price drops, offering a strategic tool in volatile markets.
The popularity of leveraged and inverse ETFs is growing among traders seeking short-term market opportunities. These financial instruments amplify daily market movements. However, Direxion cautions its investors against tracking these ETFs beyond a single day time frame, highlighting the increased risks associated with leverage. Active investors with a thorough understanding of leverage risks should carefully consider these instruments.
As of June, over 234 leveraged and inverse ETFs were available, showcasing the increasing traction they hold among traders. The recent volatility in Tesla’s stock price has clearly demonstrated the potential for both gains and losses within these leveraged investment vehicles.
