Special Situation: I'm Shorting Tesla

This is certain to be the most controversial pick I’ve made in Asymmetric Investing. Whether you’re a fan of Elon Musk or not, I encourage you to read this with an open mind.

My opinions about Tesla’s position in the market and its valuation are born from an analysis of what’s happening on the ground, not what you see on social media. And the facts back up taking a negative view of Tesla’s stock based on both valuation, fundamentals, and “vibes”.

The Exposure I’m Looking For

First of all, I need to explain what I’m looking for by starting this position.

1. Upside if “overvalued” stocks fall in 2025/2026.

2. Upside if the market crashes because the economy turns south or there’s an unexpected event (China invades Taiwan, commercial credit crisis, or other known unknowns/unknown unknowns).

3. Upside from policy changes like increasing tariffs and reduced renewable energy subsidies (known knowns/known unknowns).

In other words, this is a hedge on the market and valuations with some fundamentals backing it up. If this investment goes wrong, it’s likely the loss is more than offset by gains in the main Asymmetric Portfolio (which was up nearly enough on Tuesday to cover this trade).

I will also be using a long-dated put, or a LEAPS, to make this position. LEAPS have a known downside because you pay a price for the option to sell a stock at a future value.

In this case, Tesla’s stock is trading for $424.07 today (Tuesday night). I’m buying an option to sell the stock on January 15, 2027 (722 days from now) for $110 per share. The acquisition price for that option was $4.95 per share and options are in 100-share increments, so the total price to buy the option with Public’s rebate is $494.97 on a new account on Public.com. This is the cost basis I will track from.

The value of the option will go down if the stock goes up or as time elapses.

The value will go up if the stock falls and/or if the volatility of the stock or stock market increases — these two often happen in tandem — before the time value of the option evaporates.

This is a WAY out of the money option, but I think it’s appropriate in this case because Tesla’s stock has had 4 distinct drawdowns of over 50% since 2016 and the most recent in 2022 was 73.6%. I also intend to close the position with some time value left, but we will see how that plays out.

I will update the final numbers in this post online and in a special situation portion of the Asymmetric Portfolio.

Now, on with the thesis.