Options traders are placing large bets on solar and clean-energy stocks ahead of Tuesday's midterm elections, betting that a Democratic victory would benefit these industries.
The Invesco Solar ETF (TAN) saw options volume surge to 40 times its normal level on Tuesday, trading more than 20,000 contracts by midday, with 99% being calls. The fund typically trades fewer than 500 contracts daily over the past month. The most popular trade was buying the 50-strike call expiring in December for 80 cents, betting on a 17% rally.
SolarEdge Technologies drew heavy options interest ahead of its earnings report Wednesday morning. The stock rallied more than 6% Tuesday on volume three times higher than average, with more than 75% of that trading in calls. Traders favored buying the 35-strike call expiring Friday.
Enphase Energy also attracted options buyers. The stock fell 20% after earnings last week but has since recovered fully and gained 9% Tuesday on twice-average volume. Traders likely purchased 8,600 calls compared to under 900 puts. The popular trade was buying the 35-strike call expiring in January for $2.45 per contract, which requires the stock to rally 23%.
Charlie Moon of Chicago-based Prosper Trading Academy noted that solar stocks benefit from Democratic control. "I would only like solar if blue was in the White House," he said. Moon added that Enphase stands out partly due to insider buying activity.