3 trading strategies to take advantage of the Tesla share price roller coaster
If you are interested in trading, you will know that the Tesla share price is known for its volatility. Just this week, the electric carmaker’s shares plunged more than 10% shortly after Elon Musk asked his Twitter followers to decide whether he should get rid of billions of shares.
Despite this, Tesla stock has jumped over 30% in the past 30 days, and it remains extremely popular among investors. So what strategies do traders use to profit from the roller coaster of the Tesla share price? We will take a look.
How did the Tesla share price perform in 2021?
Since the start of the year, Tesla’s share price has fallen from $ 417 (£ 311) to $ 1,067 (£ 796). That’s an increase of over 156%. Despite this, those who trade Tesla shares will tell you that its stock price rarely follows a straight line.
Over the past year, the Tesla share price has seen a number of significant declines.
Between February 8 and March 8, the Tesla share price rose from $ 863 (£ 644) to $ 563 (£ 420). That’s a drop of over 34%. While its price rallied slightly to $ 762 (£ 569) in mid-April, it fell back to $ 563 on May 19.
It wasn’t until August that Tesla’s share price broke the $ 700 mark again. On August 2, Tesla’s share price was $ 709 (£ 529), climbing to $ 735 (£ 549) by the end of the month.
However, October was the month when Tesla stock really took off. On October 1, the automaker’s share price stood at $ 775 (£ 579). At the end of the month, it had risen to over $ 300, reaching $ 1,114 (£ 832) on October 29. The increase meant that Tesla’s market cap officially exceeded $ 1,000 billion.
Early November was also a good time for those who own Tesla shares. On November 4, Tesla’s share price hit an all-time high of $ 1,229 (£ 917).
However, since then its share price has fallen. By November 10, the value of one Tesla share had fallen to $ 1,067 (£ 797).
How did the markets react to Elon Musk’s recent Tweet?
Many have blamed Tesla’s recent drop in share price on its founder, Elon Musk. This is because Musk decided to ask his Twitter followers to find out if he should sell 10% of his shares. The poll ended with nearly 58% of votes in favor of a sale.
Musk says the reason for considering such a high stock sell-off was to address growing concerns about the lack of taxes paid by ultra-rich billionaires. According to Musk himself, who is estimated to be worth nearly $ 300 billion, the only way he can pay taxes is to sell stocks because he doesn’t earn a salary or receive a bonus.
In the wake of Musk’s Tweet, Tesla’s stock rose from $ 1,221 (£ 911) to $ 1,148 (£ 857) when NASDAQ opened on Monday. Tesla stock had fallen again on Wednesday, to $ 1,008 (£ 752), following reports that Musk had already sold $ 5 billion in shares.
How can investors profit from the volatile Tesla share price?
Last week, Tesla once again topped the list of most bought and sold stocks in the UK. With that in mind, here are three strategies investors use to profit from Tesla stocks.
Strategy 1: buy the dips
Some traders are looking to buy Tesla shares immediately after their price drops. While this may seem like a relatively straightforward strategy, research has shown that trying to time the market is often a futile approach. It is certainly much more difficult than it seems.
Strategy 2: the long game
Investors using this strategy take a slow and steady approach, with the idea that Tesla’s value will be years or even decades higher down the line. For this reason, long-haul investors are unlikely to be overly concerned about short-term fluctuations in the value of the automotive marker.
You should know that this approach is favored by many large investors, including Warren Buffet (but not necessarily with Tesla shares).
Strategy 3: regular trading
Some traders attempt to profit from Tesla’s roller coaster share price by buying and selling its shares in rapid succession.
Besides the difficulties of trying to time the market, another major drawback of this approach is the cost of making a high number of trades in the short term. This is because many investment platforms charge a stock trading fee every time you buy or sell a stock. So, unless big profits are made, high fees can lead short-term traders to find themselves in the red.
Looking to invest in Tesla?
If you are looking to invest in Tesla, you can buy the shares of the automaker through a blue chip stock trading account.
However, always keep in mind that the value of any stock can go down as well as up. Also, keep in mind that just because Tesla’s stock price skyrocketed in 2021, there’s no guarantee that it will continue to do so in the future.
Are you new to investing? Our guide to the basics of investing can help you go in the right direction.
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