Tesla's Pre-Market Decline Fuels Gains for Inverse ETFs

Tesla Inc. (TSLA) saw a pre-market decline in its stock on Friday, dropping by nearly 3%. This decline significantly affected several inverse exchange-traded funds (ETFs) that are linked to Elon Musk’s electric vehicle company, leading to a roller coaster effect for these financial instruments.

What Happened: As reported by Benzinga Pro, the Direxion Daily TSLA Bull 2X Shares (TSLL) experienced a pre-market decline of 2.93%. This followed a remarkable 43% rise the day before, which was spurred by the positive announcement of Tesla’s earnings.

Conversely, some Tesla-linked ETFs managed to gain traction during the pre-market session on Friday. The Direxion Daily TSLA Bear 1X Shares (TSLS), which had suffered a significant 21.88% drop the prior day, saw a 1.10% rebound during pre-market trading.

Furthermore, the Tradr 2X Short TSLA Daily ETF (TSLQ), which faced a steep decline of 43.93% following the earnings report, observed a 3.40% rise in pre-market trading.

In addition, the T-Rex 2x Inverse Tesla Daily Target ETF (TSLZ) managed to increase by 3.12% in Friday’s pre-market session, recovering from a major 43.94% decline observed the day before.

These inverse ETFs are designed to capitalize on declines in the value of underlying assets, which in this case is Tesla’s stock. They offer investors a means to hedge against downturns or to speculate on falling stock prices, making them a strategic option in volatile markets.

Why It Matters: Leveraged and inverse ETFs continue to gain popularity among traders looking for short-term market opportunities. These financial instruments amplify daily market movements, enabling traders to benefit from quick price shifts.

However, it’s essential to note that Direxion cautions investors against tracking these ETFs for longer than one day due to the heightened risks involved. Such ETFs are better suited for knowledgeable investors who understand the implications of leveraging.

As of June, there were more than 234 leveraged and inverse ETFs on the market, indicating a rising interest among traders in these types of financial products.

Tesla, ETFs, stocks