Shorting Tesla (For 5 Minutes)

If you have even a passing interest in a) the stock market and / or b) electric cars, then you probably know how Elon Musk’s Tesla is being shorted like no other stock. Not just by the big players either, there are whole groups of people self-organizing on Twitter and Facebook researching the hell out of the company, analyzing Musk’s every tweet, and shorting the stock like there’s no tomorrow. They are convinced that poor management, endlessly problematic manufacturing, and an unpredictable figurehead (Musk) mean that the company is inevitably doomed.

I’ve nothing against shorting a stock. Indeed I suspect that if I tallied up all my trades since I’ve been in this game I would find I have a preference for the short side. But I would find it very hard to hold a short position overnight, let alone for weeks, months, or even years. When you trade long, there is a limit to your potential losses. Go short, and you can lose far more than your initial investment.

All this shorting activity, and Musk’s digital equivalent of verbal diarrhoea on Twitter, make Tesla a volatile stock. It’s high priced (above my normal threshold), but like Apple, sometimes it puts up trades that are just too good to ignore. So when this nice short came along on huge volume and momentum, well, it would have been almost rude to refuse:

The price was already looking weak after dropping through the previous day’s low, which it retested (and failed to break above). The big drop came in two lumps, with a pause in the middle. The first alerted me to the trade, and when the second happened on huge momentum, I was in. As we can see from the chart, the next bar pushed back on even higher volume. With more than two grand profit booked, I was out.

I’m not going to say this was a stress-free trade, because when a stock moves that much that fast and you have money on the line, the old heart rate is going to become elevated. But I will say that making a couple of thousand dollars in five minutes is a considerably less stressful way to short Tesla than selling off stock and sitting on your hands for months on end!