Three different Tesla ETFs offer investors competing strategies for betting on the electric vehicle company. Each fund takes a different approach to capturing Tesla’s potential, but they come with very different risks and rewards.
TSLY, which launched in November 2022, uses a synthetic covered-call strategy. It sells Tesla call options while holding U.S. Treasury bonds as collateral. This generates monthly income for investors. However, the strategy caps potential gains if Tesla stock rises above certain price levels. Investors also face the full downside risk if Tesla’s price falls without any protection. Despite high monthly distributions, TSLY has shown negative total returns since its launch. The fund’s gross expense ratio of 0.99% reflects the costs of active management and option strategies. The high payouts mask underlying value erosion, creating what experts call a “yield illusion.” Since inception through August 2025, the fund’s total return has declined approximately 29.9%, demonstrating how return of capital can deplete shareholder equity over time.
TSLY’s high monthly payouts mask underlying value erosion, creating a “yield illusion” that obscures negative total returns.
TESL takes a completely different approach. Rather than focusing on income, it aims for capital appreciation. The ETF holds multiple Tesla-related instruments including common stock, ETFs, swaps, and options. It’s designed to capture Tesla’s growth potential as a leader in artificial intelligence and autonomous vehicle technology. TESL offers unlimited upside potential but exposes investors to full market volatility without the income cushion that TSLY provides. With a 0.97% annual expense ratio, TESL’s fees remain competitive among actively managed Tesla exposure strategies. Among Tesla-focused ETFs, TESL represents one of the highest conviction plays on Tesla’s appreciation potential.
TSLO offers yet another option through magnification. It targets approximately twice the positive monthly return of Tesla stock price movement. The fund uses a 2x leverage factor with monthly rebalancing. However, gearing introduces compounding decay risks, especially with daily rebalancing. The expense ratio stands at 0.75 percent. The fund was designed for knowledgeable investors familiar with single-stock and options-based strategies who are willing to actively monitor their positions.
All three funds concentrate exposure to a single company rather than spreading risk across multiple holdings. This creates extreme concentration risk compared to diversified alternatives like broader covered-call ETFs. TSLY’s strategy creates a permanent opportunity cost during strong Tesla rallies since gains get capped. TESL and TSLO both expose investors to Tesla’s significant volatility without income protection. Tesla’s stock price volatility can be influenced by various factors including the company’s FSD pricing strategy, which has fluctuated from $7,000 initially to as much as $15,000 before dropping in 2024.
The choice between these funds depends on what investors want. Those seeking monthly income might consider TSLY despite its performance issues. Growth-focused investors might prefer TESL’s unlimited upside potential. Aggressive traders might choose TSLO’s magnification. Each comes with distinct tradeoffs that investors can’t ignore.