Shares of Tesla (NASDAQ:TSLA) have declined by more than 40% year-to-date as Tesla bears rejoice. Meanwhile, AXS Investment’s new leveraged exchange-traded fund (ETF) seeks to gain off TSLA stock’s losses. The AXS TSLA Bear Daily ETF (NASDAQ:TSLQ) officially launched today and will provide 1x inverse exposure to Tesla, before fees and expenses.
AXS also launched other ETFs today, including funds that offer 2x exposure and inverse 2x exposure to Nike (NYSE:NKE) and Pfizer (NYSE:PFE). Leveraged single-stock ETFs are already prevalent in Europe, but these will be the first of their kind in the U.S.
AXS CEO Greg Bassuk explained:
“Whether it is powerful inflation fighting tools, ways to express views on innovation, or a host of other novel investments that previously were unavailable to investors, our goal remains to be the leader in providing investors with access to the tools needed to build portfolios and to trade effectively in today’s volatile markets.”
Let’s get into the details.
Bet Against TSLA Stock With the TSLQ ETF
TSLQ will carry an expense ratio of 1.15%, which is basically the annual cost to own an ETF. AXS mentions the fund carries high risk and is not suitable for investors who do not monitor their portfolios frequently. It also cautioned:
“For periods longer than a single day, the Fund will lose money if TSLA’s performance is flat, and it is possible that the Fund will lose money even if TSLA’s performance decreases over a period longer than a single day.”
In order to manage the ETF, AXS will enter into swap agreements with global financial institutions. These will range from a day to more than a year. The time period will be agreed upon by the two parties.
SEC Warns Against Single Stock ETFs
Securities and Exchange Commission (SEC) Commissioner Caroline Crenshaw believe single stock ETFs are not for the faint of heart. She warns the ETFs are risky for investors and potentially for the market as well. On top of that, Federal Reserve Chair Gary Gensler stated that the ETFs “present particular risk.”
Still, AXS has made it very clear in its summary prospectus that TSLQ is not for beginner investors or traders. Bassuk even stated explicitly that the ETF is not for buy-and-hold investors.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.