Tesla Short Sellers Are the Happiest People Right Now as $4B Flows into Their Pockets Amid Trump-Musk Feud

Traders betting against Tesla are celebrating what may go down as one of their most lucrative weeks in recent memory,
as a fiery public clash between President Donald Trump and Tesla CEO Elon Musk triggered a staggering $4B windfall for short sellers in just a single trading session.

The drama that unfolded between the two titans of politics and technology sent Tesla stock into its sharpest single-day plunge in years,
erasing $150B from the company’s market value and setting Wall Street abuzz about what comes next for the most sentiment-driven stock among the so-called Magnificent 7.

According to fresh data from analytics firm Ortex, traders pocketed an astounding $4B in profit on Thursday alone from their short positions against Tesla —
the second biggest one-day gain ever recorded from shorting the EV giant.

Only one day in history, September 8, 2020, yielded bigger profits when a $5.4B bonanza followed Tesla’s exclusion from the S&P 500 index.

Thursday’s performance firmly cements Tesla as the most profitable target for bearish investors among this year’s elite group of tech stocks.
Apple, despite its size and stature, trails in second place in short seller profits for the year, also per Ortex data.

The scale of this profit-taking is underscored by trading volumes that skyrocketed to levels not seen since Tesla officially joined the S&P 500 in December 2020.
A stunning 275M shares exchanged hands on Thursday, far eclipsing the daily averages seen earlier in the week when volumes hovered below 100M.

This massive jump strongly signals that large institutional players were driving much of the activity,
rather than the typical surge of retail traders chasing headlines or meme-fueled volatility.

What began as a dramatic news story quickly evolved into a genuine market event with billions of dollars on the line.

Options markets told a similar story of conviction replacing caution.
A record 4M Tesla put contracts were traded during the session, quadrupling the daily average, according to data from Dow Jones.

The sheer scale of bearish positioning revealed that traders were no longer merely hedging against the stock’s volatility;
they were actively betting that the stock had much further to fall — and were willing to put serious capital behind that belief.

As Danny Kirsch, head of options at Piper Sandler, noted,
being on the good side of the President of the United States had historically been a net positive for Musk’s businesses.

Now that Musk has landed squarely on Trump’s bad side, the calculus has shifted dramatically and suddenly.

The feud between Musk and Trump erupted into full public view earlier in the week
when Musk blasted Trump’s latest spending bill on X, calling it a “disgusting abomination” due to a perceived lack of incentives and benefits for his own companies.

What happened next poured gasoline on an already volatile situation.

Musk lobbed an incendiary Epstein-related accusation at the President,
drawing immediate and forceful retaliation from Trump, who vowed to cancel Tesla’s and SpaceX’s federal contracts
and hinted at broader regulatory consequences for Musk’s sprawling empire.

For institutional investors managing billions of dollars in risk, Trump’s threats sounded all too credible —
particularly given the power of the federal government to make life very difficult for a company so exposed to federal partnerships and regulatory scrutiny.

Beyond the threat of lost contracts, analysts pointed to another potentially devastating consequence of the rift.

As Casey Newton of Platformer observed, Musk’s prior influence within Trump’s administration
had helped him engineer sweeping cost cuts and reduce the budgets of key regulatory agencies.

A Senate Democrats report estimated that Musk’s actions protected him from as much as $2.37B in legal liability from U.S. agencies.

Now that this alliance lies in ruins, those same agencies may be emboldened to return with renewed focus and aggression.

In Newton’s words, this is why Musk’s supposed pivot toward a purely business-focused strategy was never entirely credible.
He had always been hyper-focused on protecting his companies, both through market maneuvering and political influence.

Thursday’s market action suggests that this once finely balanced focus may have finally tilted.
Tesla, more than most stocks, trades as much on vibes and sentiment as on fundamentals.

The record volume, extreme bearish positioning, and outsized short profits suggest that the mood has shifted decisively, at least in the near term.

With nearly half of Tesla’s shares held by institutional investors,
any sustained wave of large-scale selling could send the stock even lower —
potentially triggering a cascade effect as indexes and funds adjust their positions.

While some passive funds are locked into Tesla as long as it remains in the S&P 500,
active managers now face an uncomfortable choice:

Do they hold their positions and hope that Musk and Trump de-escalate the feud,
or do they exit now while liquidity remains high and before any potential regulatory action materializes?

The choice is far from easy.
The dramatic nature of the feud, combined with Musk’s erratic behavior and Trump’s proven willingness to use the levers of government power,
has introduced a level of political risk to Tesla stock that few investors can ignore.

For short sellers, the opportunity remains tantalizing.

Having already banked $7.5B in cumulative profits from Tesla trades this year,
they now face a landscape where the company’s future is more uncertain than ever.

The fact that Thursday’s $4B haul was the second biggest on record speaks volumes about the volatility that still lies ahead.

Traders will no doubt be watching closely to see whether Musk can rebuild bridges with Washington,
whether legal challenges mount, and whether institutional investors decide to abandon what has long been one of the market’s most volatile and passionately followed names.

Ultimately, what happens next is anyone’s guess.
Tesla has defied expectations countless times before,
and Musk remains one of the most resourceful and audacious figures in global business.

Yet even for a figure as influential as Musk, political headwinds of this magnitude are not easily neutralized.

For now, the mood in the Tesla short community is one of celebration,
as billions in profits flow into their accounts amid the chaos.

Whether this proves to be a fleeting opportunity or the start of a more sustained downturn for Tesla
will depend not only on market forces, but on the unfolding drama between Musk and the most powerful political figure in the world.

In the meantime, short sellers can rightly claim to be the happiest players on Wall Street today,
riding the wave of a feud that shows no signs of abating.