Investing in Tesla stocks can yield major returns, but the electric vehicle company is also a favorite target for short sellers who believe that its stock will decline. This comprehensive guide will teach you how to short tesla safely, and review several different methods for doing so.
How to short tesla speaking, there are two main ways to short Tesla shares: through traditional equity margin trading and using derivatives like CFDs or options. In either case, traders must understand the risks involved and adhere to the appropriate regulations for their jurisdiction (e.g., the FCA in the UK).
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The first method involves opening a brokerage account with a broker that allows short selling and then borrowing Tesla shares from the broker to sell in the market. When the share price falls, the short seller will then buy back the borrowed shares and return them to the brokerage, profiting from the difference in prices. However, this approach can carry significant risk. Investors should closely monitor Tesla’s stock performance, as well as any news events that could affect it. Moreover, they should be aware of the ‘borrow’ fee charged by their broker, which is typically a percentage of the total trade value.
The second method involves buying put options, which give investors the right to sell a specified amount of shares at a predetermined price (strike price) within a specific time period. When the option’s strike price is below the Tesla share price, the holder can exercise the option and make a profit. However, this strategy is also subject to a number of important risk factors, including the possibility that the strike price may never be reached.