A Smart Strategy To Help Beat Tesla’s Volatility

Within the U.S. equity universe, a select number of stocks attract the lion’s share of investor attention and media coverage. Typically laden with a “tech” narrative, these stocks – dubbed “high-conviction” stocks – often run at prices well in excess of its enterprise value, the stock price of its peers in the same industry, and have a substantial growth potential implied in its trajectory. As a result, “high-conviction” stocks are particularly sensitive to challenging news events, indicators of growth slowdown, and even macroeconomics.

In February 2025, Tesla experienced a multi-faceted sell-off: vehicle deliveries and registrations dropped in key markets like China and Europe, price cuts squeezed profit outlooks, shifting EV subsidies and tariffs created international pressure, and CEO Elon Musk’s political affiliations stirred further uncertainty.

The result? A 28–30% decline in Tesla’s stock price relative to its performance earlier in the year.

For long-term investors, such volatility can make direct exposure to the stock a daunting prospect. But rather than abandoning exposure altogether, professional investors might consider tactical instruments like the Leverage Shares 3X Long Tesla ETP (TSL3) and the Leverage Shares -3X Short Tesla ETP (TS3S) to tactically hedge or capitalize on directional moves in the stock.

Using Signals to Trade the Trend – Not the Narrative

TSL3 is designed to provide magnified gains when Tesla’s price rises, while TS3S is designed to deliver magnified returns when Tesla falls. At first glance, these tools may seem risky— as the period throughout February 2025 till the 12th of September 2025 showcases.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

Source: Leverage Shares analysis

But it’s important to understand: these are tactical tools governed by daily compounding and rebalancing mechanics. That means their value is derived from short-term sentiment and price movements, not long-term fundamentals or investor conviction.

Here’s an example of a simple “look-back” strategy: on any given day, the stock’s closing price on the previous day is compared to the day before. If it closed lower, this is a “signal” to buy TS3S (i.e. the “leveraged inverse”). Otherwise, it is a “signal” to buy TSL3 (i.e. the “leveraged”).

To demonstrate this strategy, some assumptions on the computation of the strategy’s performance would be in order:

An amount of US$100,000 into Tesla stock is initially made, of which 20% is reallocated to the purchase of the ETPs the next day.
Only one ETP is held at any time — with a switch between TS3S and TSL3 as signals change.
No fractional shares are bought; unallocated amounts are held in cash.
If the strategy recommends – on any given day – that the same type of instrument (i.e. either TSL3 or TS3S) that was purchased the previous day be held, there is no additional action beyond simply holding the instruments in the portfolio.
No change in ETP holdings is made if the same ETP is signalled for two days in a row.
The price used to compute the ETP holdings, amount freed by the sale of an ETP or amount required to purchase ETPs on any given day would be the closing price of the instruments on that day.

From the 18th of February – wherein an investment of $100,000 is made into purchasing Tesla stock followed by an 80:20 split in allocation into ETPs the next day – till the 12th of September, the strategy would have yielded a substantial advantage over an investment of the same amount in purely Tesla stock.

Source: Leverage Shares analysis

Within this time period of 140 trading sessions, the ETP component was switched between TS3S and TSL3 21 times. This systematic strategy resulted in 27 of these sessions ending with TS3S being held and 113 sessions with TSL3 being held.

Within this period, the “Tesla Stock Only” portfolio declined by 9.3% while the value of the “80:20” portfolio declined by only 0.7%.

Leverage for Risk Management

As the “80:20” portfolio’s performance exemplifies, leveraged ETPs – when used tactically – may help mitigate downside risk without fully exiting a core stock position. Many investors view leveraged products as speculative tools but this need not be the case. When deployed thoughtfully, they may serve as protective instruments that help manage capital during market turbulence.

The Tesla case shows that investors don’t need to abandon high-conviction positions to manage risk. Instead, by strategically incorporating leveraged ETPs, they can hedge volatility while maintaining long-term exposure.

Professional investors in Europe have plenty of tools at their disposal to navigate high-stakes market dynamics. Leverage Shares’ suite of products is among these tools that might be worthy of consideration.

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