Industry Updates

Traders bullish on Tesla as market prepares for S&P 500 inclusion

Long Tesla has been a far more popular trade than short, according to analysis conducted by GraniteShares

Tom Eckett

Tesla supercharger

Investors are predicting Tesla will rise even further after it starts trading in the S&P 500 on 21 December.

According to analysis conducted by ETF issuer GraniteShares, its triple leveraged long Tesla exchange-traded product (ETP) saw twice as many trades as the firm’s short ETP.

The GraniteShares 3x Long Tesla Daily ETP (3LTS) saw $10.3m trades on the London Stock Exchange (LSE) between 1 and 14 December while there were $4.4m trades on the GraniteShares 3x Short Tesla Daily ETP (3STS).

Will Rhind, founder and CEO at GraniteShares, said 3STS had historically seen more demand since listing on the LSE in July versus 3LTS, however, this had switched in preparation for the inclusion.

“Much of Tesla’s growth has come from its car sales, boosted by strong demand from China and hopes of subsidies for electric vehicles,” Rhind continued. 

“Many investors also believe there is strong growth to come from other parts of Tesla’s business including its self-driving software and battery power storage.”

‘The index committee relented’: ETF investors react to Tesla’s inclusion in S&P 500

Tesla’s inclusion in the S&P 500 is set to be the biggest on record with approximately $83bn set to flow into the electric vehicle manufacturer from index funds and ETFs alone.

The decision, which was announced on 16 November, will see Tesla account for around 1.58% of the flagship US index.

It has already had a significant impact on Elon Musk’s company with Tesla’s stock rising 52.6% since the announcement taking its overall year-to-date performance to a massive 624%, as at 16 December.

This performance has led some parts of the market to caution about the set to be sixth-largest stock within the S&P 500.

Recent research conducted by Research Affiliates has argued the dramatic increase in share price this year constitutes the firm's definition of a bubble.

"Our definition is implausible assumptions are needed to justify its valuation, and buyer interest is based on a great narrative rather than being supported by a conventional valuation model," Rob Arnott, founder and chairman of Research Affiliates, and co-author of the report, said.

"Given all the classical signs of a bubble in Tesla’s stock, and the evidence of 31 years of S&P additions and deletions, 21 December likely marks the beginning of a reversal in Tesla’s share price."

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