As prediction markets suggest a strong likelihood of Democratic wins in the midterm elections, options trading in clean-energy stocks has surged, particularly in the Invesco Solar ETF (TAN). On Tuesday, trading volume for TAN reached over 20,000 contracts, a stark increase from its usual volume of fewer than 500 contracts per day, with 99% of these being call options.
This ETF, which had previously rallied over 400% from its pandemic low to the 2020 election before experiencing a significant decline, is now seeing renewed interest. The most popular trade involved buying the 50-strike call for December expiry, priced at 80 cents, anticipating a 17% rally.
Individual stocks like SolarEdge Technologies also saw heightened activity, with trading volume three times higher than average and a notable 6% increase in stock price ahead of its earnings report. Enphase Energy, despite a 20% drop after its last earnings report, has rebounded and is attracting bullish bets, with traders purchasing 8,600 calls compared to under 900 puts.
The most favored trade for Enphase was a 35-strike call expiring in January, priced at $2.45 per contract, requiring a 23% rally to be profitable. This surge in options trading reflects a broader market sentiment that favors clean-energy investments under a potential Democratic administration