How To Short Tesla Stock – Ultimate Guide About 2025!

Tesla, Inc. (NASDAQ: TSLA) is one of the most popular and volatile stocks in the world. The company, led by Elon Musk, has seen massive price swings over the years, attracting both passionate investors and skeptical traders. While many believe in Tesla’s long-term future in electric vehicles and clean energy, others think the stock is overvalued. That’s where shorting Tesla stock comes in — a strategy that allows traders to profit when the price of Tesla’s shares falls.

To short Tesla stock, you borrow Tesla shares from a broker and sell them at the current price, hoping the price will drop. Later, you buy back the shares at a lower price and return them to the broker, keeping the profit. Shorting is risky because if Tesla’s price goes up instead, you’ll lose money. Always research and understand the risks before shorting.

In this guide, you’ll learn how to short Tesla stock, what it means, the risks involved, and alternative ways to profit from a potential Tesla downturn. This article will break down everything in simple, human terms, so even beginners can understand how short selling works.

What Does It Mean to Short Tesla Stock?

Shorting, or short selling, means betting that a stock’s price will go down instead of up. Normally, investors buy a stock and hope its price rises — that’s called taking a “long” position. But in short selling, you do the opposite.

Here’s a simple explanation:

1. You borrow shares of Tesla stock from a broker.
2. You sell those borrowed shares at the current market price.
3. If the price drops, you buy them back at a lower price.
4. You return the shares to the broker and keep the profit (the difference between the selling and buying prices).

For example:

• You borrow 10 shares of Tesla at $250 each = $2,500 total.
• The price drops to $200.
• You buy back the 10 shares for $2,000.
• Your profit = $500 (minus any fees and interest).

That’s the basic idea behind shorting Tesla stock.

Why Do Investors Short Tesla Stock?

Tesla has always been a controversial stock. Some investors love its innovation, while others believe it’s overhyped. Here are some of the main reasons people short Tesla stock:

1. High Valuation: Tesla’s market capitalization often exceeds that of multiple traditional carmakers combined, even though it sells fewer vehicles. Critics argue that the valuation is too high compared to earnings.
   
2. Competition: As more automakers — like BMW, Ford, Rivian, and BYD — expand their EV offerings, some investors think Tesla could lose market share.
   
3. Fluctuating Profits: Tesla’s earnings have improved but can still fluctuate due to price cuts, raw material costs, and global demand changes.
   
4. Elon Musk’s Influence: Tesla’s stock often reacts sharply to Musk’s tweets, actions, and decisions. Some traders short the stock when they believe Musk’s statements could negatively impact its price.
   
5. Speculative Nature: Tesla’s stock can swing dramatically in a single day. Short-term traders may short the stock to take advantage of such volatility.
   

How To Short Tesla Stock: Step-by-Step Guide

If you want to short Tesla stock, follow these detailed steps. Remember, this strategy carries high risk and should only be used if you understand what you’re doing.

Step 1: Open a Margin Account

You can’t short a stock in a regular brokerage account. You’ll need a margin account, which allows you to borrow money or shares from your broker.

Popular brokers that support short selling include:

• Interactive Brokers
• TD Ameritrade
• E*TRADE
• Charles Schwab
• Robinhood (for limited margin users)

Once your account is approved, you’ll have access to margin trading and short selling options.

Step 2: Research Tesla’s Stock

Before shorting, study Tesla’s financials, charts, and recent news. Look for signs that might indicate a price decline, such as:

• Declining sales or deliveries
• Falling EV market share
• Rising competition
• Economic downturns or higher interest rates
• Negative company announcements

Also Read: How Much Does It Cost To Charge A Tesla – 2025 Guide!

Step 3: Borrow and Sell Tesla Shares

When you short Tesla, your broker will locate and lend Tesla shares to you. You’ll then sell them immediately at the current market price.

For example, if TSLA is trading at $250 and you short 100 shares, you’ll receive $25,000 in proceeds — but remember, you owe those 100 shares to your broker later.

Step 4: Monitor Tesla’s Stock Price

After shorting, closely monitor the price. If it drops, you can buy back the shares cheaper and make a profit. However, if it rises, you’ll face losses.

Unlike normal investing, your losses can be unlimited because a stock can keep rising indefinitely.

Step 5: Buy Back and Close Your Position

When you’re ready to exit the trade, you’ll buy back the shares and return them to your broker. This is called “covering” your short position.

Example:

• You sold Tesla at $250.
• The price dropped to $200.
• You buy back at $200 and cover your short.
• Your profit is $50 per share.

If the price had gone up to $300 instead, you’d lose $50 per share.

Also Read: Do Teslas Need Oil Changes – Complete Guide of 2025!

Risks of Shorting Tesla Stock

Shorting Tesla stock can be profitable, but it’s also very risky. Here are the main dangers you should understand:

1. Unlimited Losses
   When you buy a stock, the most you can lose is your investment (if it goes to zero). But in short selling, there’s no limit — the price can keep rising, increasing your losses.
   
2. Short Squeeze Risk
   A short squeeze happens when many traders short the same stock. If the price suddenly rises, short sellers rush to buy back shares to cut losses, pushing the price even higher. Tesla has seen short squeezes in the past, especially when bullish news hits.
   
3. Borrowing Costs
   You pay interest and fees to borrow shares. If demand for shorting Tesla is high, borrowing costs can increase, reducing profits.
   
4. Margin Calls
   If the trade goes against you, your broker might issue a margin call, asking for more funds to cover potential losses. If you can’t pay, they may liquidate your position at a loss.
   
5. Timing Is Hard
   Even if Tesla’s valuation looks high, it could stay high for years. Many professional investors have lost money shorting Tesla too early.
   

Also Read: How Much Does It Cost To Wrap A Tesla Cybertruck – 2025 Guide!

Alternatives to Shorting Tesla Stock

If you want to profit from a potential Tesla decline without the high risk of short selling, consider these safer alternatives:

1. Buy Put Options

Put options give you the right (but not the obligation) to sell Tesla stock at a set price before a certain date. This lets you profit from a decline while limiting losses to the cost of the option.

2. Inverse ETFs

Some exchange-traded funds (ETFs) move opposite to the market or a specific sector. You can invest in inverse technology or EV ETFs that rise when tech or EV stocks fall.

3. Bearish Tesla ETFs

There are ETFs designed to move inversely to Tesla stock specifically, such as the Direxion Daily TSLA Bear 1X Shares (TSLS). This allows investors to short Tesla indirectly.

4. Reduce Exposure Instead

If you already own Tesla shares and fear a drop, you can sell part of your position or use stop-loss orders to protect profits.

Also Read: Where Are Tesla Motor Cars Made – Complete Guide Of 2025!

Example Scenario of Shorting Tesla

Let’s say you believe Tesla’s next earnings report will disappoint investors. Here’s how the trade might go:

• Tesla stock is trading at $260.
• You short 50 shares = $13,000 total.
• After earnings, the stock drops to $220.
• You buy back at $220 = $11,000.
• Profit = $2,000 (minus fees).

But if earnings beat expectations and the stock jumps to $300, your loss would be $2,000 instead.

This example shows how timing and research are critical in short selling.

Is It Legal to Short Tesla Stock?

Yes, shorting Tesla stock is completely legal, as long as it’s done through a licensed broker and follows market regulations. However, naked short selling — selling shares that haven’t been borrowed — is illegal.

Regulators like the SEC monitor short-selling activity to prevent market manipulation or unfair trading practices.

When Is the Best Time to Short Tesla Stock?

There’s no guaranteed “best time,” but here are some situations where traders might look for short opportunities:

• Right before earnings, if they expect weak results.
• After big rallies, when the price seems overextended.
• When Tesla faces production delays or recalls.
• During economic slowdowns that could hurt EV demand.

However, shorting Tesla during hype cycles — such as product launches or positive news — can be very risky.

How Can I Short Tesla Shares?

To short Tesla shares, you borrow Tesla stock from a broker, sell it at the current market price, and later buy it back hoping the price falls. The difference is your profit. You’ll need a margin account and must pay interest or fees on borrowed shares. Shorting is risky, as losses can grow if Tesla’s stock rises instead.

Is There a Fund That Shorts Tesla?

Yes, several funds are designed to short Tesla. Popular examples include inverse ETFs like AXS TSLA Bear Daily ETF (TSLQ), which aims to profit when Tesla’s price drops. These funds use derivatives to move opposite Tesla’s stock. They’re easier for regular investors than direct short selling, but they also carry higher daily volatility and risk

Is Anybody Shorting Tesla Stock?

Yes, many traders and hedge funds continue to short Tesla stock. Despite its popularity, Tesla often attracts short sellers who believe the company’s valuation is too high or its growth will slow. Data shows billions in short interest still exist, though the percentage has declined as Tesla’s long-term outlook remains strong in the EV market.

How Much Would It Cost to Short a Tesla?

The cost to short Tesla depends on your broker’s margin requirements and borrow fees. Typically, you’ll pay interest on the borrowed shares, ranging from 1% to 10% annually depending on demand. You must also maintain collateral. If Tesla’s price rises, your broker may issue a margin call, making shorting potentially expensive and risky.

What Is 3x Short Tesla?

A 3x short Tesla refers to a leveraged ETF that aims to deliver three times the opposite of Tesla’s daily performance. If Tesla drops 1%, this ETF should rise 3%, and vice versa. It’s a high-risk, short-term trading tool. Examples include funds using derivatives and leverage, not suitable for long-term holding due to compounding risks.

Best Short Tesla ETF

The AXS TSLA Bear Daily ETF (TSLQ) is widely known as one of the best short Tesla ETFs. It’s designed to deliver the opposite of Tesla’s daily performance, helping investors profit from Tesla’s price declines. Other ETFs, like certain inverse tech funds, may include Tesla exposure indirectly. However, all carry high volatility and short-term risk.

How to Short Tesla Stock ETF

You can short Tesla indirectly through inverse ETFs like TSLQ, which rise when Tesla’s stock falls. To do this, open a brokerage account, search for the ETF ticker, and buy shares just like any stock. These ETFs are simpler than direct short selling but are meant for short-term trades, as their performance resets daily.

How to Short Tesla Stock on Robinhood?

To short Tesla stock on Robinhood, you can’t borrow shares directly since Robinhood doesn’t allow traditional shorting. Instead, you can buy put options on Tesla, which increase in value as the stock falls. Alternatively, you can purchase an inverse ETF like TSLQ for similar exposure. Always monitor risk, as options and leveraged ETFs can move quickly.

2x Short Tesla ETF.

A 2x short Tesla ETF gives investors double the inverse daily return of Tesla’s stock. For example, if Tesla drops 2%, this ETF aims to rise 4%. These funds use leverage and derivatives to amplify returns but also magnify losses. They’re designed for experienced traders seeking short-term strategies, not for long-term Tesla investors.

Conclusion: Should You Short Tesla Stock?

Shorting Tesla stock can be a profitable but dangerous move. It requires careful research, timing, and a strong understanding of market risks. Tesla remains a highly volatile stock that can surprise both bulls and bears.

If you believe Tesla is overvalued and have a high risk tolerance, shorting might be worth exploring. But for most investors, it’s safer to use alternatives like put options or bearish ETFs. Always manage your risk, set stop-losses, and never short more than you can afford to lose.

In the end, Tesla’s stock is as unpredictable as its CEO — and that’s what makes it both exciting and risky.

FAQs:

1. Can I short Tesla stock on Robinhood?

Yes, but only if you have a Robinhood Gold margin account. Not all users qualify, and Robinhood has restrictions on shorting certain high-risk stocks.

2. Is shorting Tesla stock risky?

Yes, very. Since Tesla’s price can rise indefinitely, losses can be unlimited. Always use stop-loss orders and risk management.

3. Can I short Tesla with options?

Yes. Buying put options on Tesla is a popular and safer way to profit from a price decline.

4. What’s the difference between shorting and buying puts?

Shorting involves borrowing and selling shares directly, while puts are contracts that gain value if the stock falls — with limited risk.

5. How much money do I need to short Tesla stock?

You’ll need a margin account with enough funds to cover potential losses and meet the broker’s margin requirements. Usually, it’s at least $2,000 or more.