TSLL 1.5x Leveraged Stock ETF: Direxion Daily TSLA Overview

How does TSLL stock work?

TSLL is the stock ticker for the Direxion Daily TSLA Bull 1.5X Shares exchange-traded fund. This leveraged ETF provides retail investors exposure to the daily price movement of electric vehicles maker Tesla.

Under normal circumstances, TSLL seeks to achieve daily investment results that correspond to 1.5 times the daily performance of the underlying stock. It accomplishes this leverage through the use of financial instruments like swap agreements and futures contracts, rather than directly holding securities of TSLA.

Unlike traditional ETFs that simply track an index, leveraged and inverse ETFs like TSLL are actively managed and rebalanced daily to maintain their stated leverage ratio. They aim to deliver a multiple of the daily returns of the underlying stock, which in this case is Tesla.

However, due to the effects of daily compounding, TSLL may not closely track the performance of TSLA stock over longer periods of time, especially during periods of higher TSLA volatility. The ETF also carries a high degree of risk since it relies entirely on the performance of a single stock rather than a basket of individual stocks.

TSLL is intended for trading purposes rather than long-term investment purposes. Due to its 1.5x leverage and the higher volatility of TSLA, this ETF may be too aggressive for the average retail investor’s personal finance and individual investor objectives.

Instead, TSLL caters to speculative investors looking to make short-term bets on Tesla’s daily price movement. It can magnify gains during periods when TSLA is rising day-to-day, but will also amplify losses during periods when TSLA’s daily returns are negative.

It’s important for investors to understand that TSLL and other leveraged ETFs reset their leverage ratio every day rather than delivering amplified returns over a longer period of time. So results beyond one trading day may differ substantially compared to the actual performance of the TSLA stock market price over the same longer-term time frame.

As with any investment product, TSLL’s past performance is no guarantee of future results. Investors should carefully consider their personal financial situation and risk tolerance before trading this ETF. 

Can I Hold TSLL for the Long Term?

TSLL is designed to provide leveraged exposure to the daily performance of Tesla’s stock price, not long-term exposure. So holding this exchange-traded fund for extended periods is generally not recommended as part of a buy-and-hold investment strategy.

As a single-stock ETF with 1.5x leverage, TSLL aims to deliver 1.5 times the daily performance of TSLA. It accomplishes this through the use of derivatives and by resetting its leverage ratio each trading day. However, performance may deviate significantly from Tesla’s over longer timeframes.

Leveraged exchange-traded funds like TSLL are intended for tactical traders looking to capitalize on short-term moves in the underlying shares of Tesla stock. They allow investors to enhance exposure to anticipated price swings over periods of days or weeks. However, effects like volatility drag and daily compounding can severely minimize returns over months or years.

So while TSLL can amplify gains during strong upward moves in Tesla lasting up to a month or two, holding this ETF for the long run is not an optimal strategy. It poses unnecessary risks related to leverage, while likely underperforming the stock over longer periods.

For investors focused on long-term exposure to Tesla as part of their personal finance and investment objectives, cheaper and less risky alternatives exist. These include purchasing Tesla’s shares outright to track its performance directly over time. Long-term equity anticipation securities (LEAPs) are another option granting multi-year exposure without the need for leverage.

The bottom line is that while TSLL can boost short-duration tactical bets on Tesla’s daily share price, single-stock ETFs are not structured to outearn the stock itself over the long run. 

How to Trade TSLL in the Short-Term

I use the Alpha Dots and Alpha Track Line indicators to find entry opportunities. Both indicators are available in the yearly Alpha bundle from Trading Alpha.

According to the rules of the indicators, traders should look for two consecutive green dots above the track line before making an entry.

In addition, the HTF Indicator Suite from Trading Alpha highlights volatility squeezes, as marked by the shaded area on the chart. These shaded areas let you know a violent breakout is going to happen soon, and the direction is marked by a red down arrow or a green up arrow.

​Look at the TSLL chart below.

How does TSLL stock work?

A squeeze took place on May 18, 2023. The uptrend lasted until July 23, 2023. Another squeeze above the track line took place on December 19, 2023. I would be long TSLL here.

Does TSLL Pay Dividends?

Yes, TSLL does pay dividends. In the past 12 months, TSLL has distributed a dividend to its shareholders. For each share of TSLL, shareholders received a dividend payment of $0.11. This results in an annual dividend yield of 1.99% for TSLL, which is a measure of the dividend payment in relation to its share price.

Conclusion

While TSLL aims to deliver 1.5 times the daily performance of Tesla’s common shares, it is not an optimal long-term investment due to effects like volatility drag. Instead, TSLL caters to tactical traders looking to capitalize on anticipated short-term moves in Tesla’s stock price over periods of days or weeks. For those focused on long-term exposure to match the performance of the common shares of Tesla, cheaper alternatives with less risk exist. For example, purchasing Tesla’s stock outright. So TSLL can amplify gains during upward moves in Tesla lasting up to a few months, but extended holding periods pose unnecessary leverage-related risks and will likely underperform the stock itself over longer timeframes.

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Mark Fortune
Mark Fortune is a seasoned journalist and editor with more than two decades of experience. Specializing in technology, cryptocurrency, and stock investments, his incisive writing has made significant contributions to the business journalism field. Mark’s work is celebrated for its depth, clarity, and influence on a global readership.