Earnings Infocus | Exploring inverse ETFs as a strategic alternative to Tesla's decline

During the earnings call, Elon Musk discussed key areas such as Robotaxi, Full Self-Driving (FSD), and humanoid robots but failed to boost market confidence. Consequently, Tesla's stock fell over 2% by the end of the day and dropped more than 7% in after-hours trading.

Tesla is facing multiple challenges, with policy risks and political uncertainties being particularly prominent. The Trump administration's plan to cut the Inflation Reduction Act (IRA) poses a direct threat to the tax incentives relied upon by Tesla and the entire automotive industry, especially manufacturing and investment tax credits, potentially impacting Tesla's financial health and competitiveness negatively. Additionally, ideological divisions in market acceptance are troubling Tesla. According to Pew Research Center data, there is a clear political divide in interest in electric vehicles (EVs), with Republican and right-wing voters showing significantly less interest compared to Democratic and left-wing voters, creating additional obstacles for Tesla in promoting EV adoption. Furthermore, Tesla is struggling with product delays and the pressure of technological innovation. The release date for its highly anticipated Robotaxi has been postponed to October 10, two months later than planned, causing unease among investors and the market, and complicating Tesla's efforts to maintain a leading position in the autonomous driving field.

The challenges faced by Tesla could have various impacts on investment, depending on the investor's strategy and risk tolerance. Here are some potential impacts and considerations:

Increased market volatility: The policy risks, political uncertainties, as well as product delays could lead to increased stock price volatility. This volatility could lead to instability in Tesla stock price.

Uncertain financial performance: The reduction of tax incentives and manufacturing and investment tax credits could negatively impact Tesla's financial health and competitiveness, affecting its profitability. This may lower investors' expectations for Tesla's future growth, impacting its long-term investment value.

Challenges to technological leadership: If Tesla fails to maintain its leading position in autonomous driving technology and other innovation areas, it may lose market share, affecting its image in the high-tech sector and investor confidence. An investment portfolio heavily concentrated in Tesla or similar high-risk, high-reward stocks could see impacts on stock prices and investment returns.

Differrent investors can make appropriate adjustments based on their risk tolerance and investment objectives.

Tesla stockholders with a significant portion of their portfolio allocated to the stock may feel particularly anxious, especially when the stock price drops more than 7% overnight. Selling their shares at that moment could result in substantial losses. What strategies can they use to mitigate their risk?

Covered call strategy: The premium received from selling call options can be used to lower your stock holding costs, offset losses from stock price declines, and enhance overall portfolio returns. As a short-term strategy, it can be combined with other investment strategies to flexibly adjust portfolio and adapt to market changes.

Inverse ETFs: Short selling is subject to extensive regulations, and in some cases, the costs associated with short selling can be quite high. If you are looking to profit from a decline in Tesla's stock price, you might consider the following inverse ETFs, which can even leverage to amplify returns.

Tesla is not just a traditional car manufacturer, but is also a groundbreaking AI company with a promising future. The recent price decline might present a great buying opportunity for those who have been hesitant to invest due to high prices. In addition to purchasing more shares, investors can also consider the following ETFs.