Elon Musk's Tesla Rally Roasts Short Bets, Turns This ETF Into Loss Machine

September has historically been Wall Street's "bad luck month," but this year it's been anything but, unless you've been betting against Tesla Inc. TSLA.TSLZ stock saw amplified losses past month. Track its prices in real-time.The T-Rex 2x Inverse Tesla Daily Target ETF TSLZ, which provides double inverse exposure to Tesla’s daily movements, has fallen about 40% over the last month. Its drop arrives as Elon Musk‘s electric car behemoth mounted one of its strongest rallies in recent memory, climbing almost 30% in the past month and achieving its best month overall since November 2004 and its strongest September ever.The math is unrelenting but straightforward: TSLZ’s job is to return negative 200% of Tesla’s day-to-day move. When the stock explodes, the ETF is trampled, and September’s market configuration provided Tesla bulls with every incentive to pop the champagne.Wall Street itself is in uncharacteristic shape. The S&P 500 has resisted seasonally weak months, gaining 3.8% uptill Sep 23, on course for its strongest September since 2010. Supportive macro factors, like the Federal Reserve rate-cut hopes, solid earnings, a healthy economy, and benign inflation, have been providing a sweet spot for stocks. For Tesla, the mix was all the more intoxicating.China sales were a resounding catalyst. Tesla’s insured registrations in China reached 17,200 units in the week ended Sept. 21, a 33% gain from the previous quarter. Deutsche Bank analysts now anticipate Tesla delivering 72,000 units in China in September, a pronounced 27% increase from August. Couple this with excitement over its soon-to-arrive Cybercab patent and the company’s stock has been essentially defying gravity.For owners of TSLZ, the experience has been gut-wrenching. What appeared to be a short against Tesla’s volatility legend became an amplified losing wager. The new ETF, which debuted this year, is now a cautionary tale of the dangers of leveraged inverse investing, potent in fleeting spurts, but brutal if the trend is against you.As Rick Gardner of RGA Investments summed it up, “The stock market's strength is making it tougher to put new money to work, as valuations are rising, which makes it all the more important for investors to be selective and bottoms up.” For Tesla bears, it’s been even more difficult to prevent old money from disappearing. Move Over, Nvidia—Micron’s Rally Just Rewired The AI ETF Playbook Photo: Shutterstock