Add water and sugar to a small saucepan. Bring to a boil and reduce to a simmer until sugar dissolves, about 2-3 minutes. Set aside and cool completely.
Add cooled sugar water, watermelon, tequila and lime juice to a blender. Blend until smooth.
Pour mixture into a 9X12 baking dish. Place in the freezer. Freeze for 25 minutes. Pull out and use a fork to stir the mixture. Place back in the freezer and pull out again in 25 minutes, use a fork to start to flake the mixture. Repeat until the entire dish is frozen flakes. Serve immediately.
Recipe by Cooking for Keeps at https://www.cookingforkeeps.com/watermelon-margarita-granita/