After five months of sell-offs, is there finally a turning point? With expectations of a Democratic victory, funds bet on a rebound in clean energy stocks and options trading volume surges.
As prediction markets bet that Democrats will achieve a significant victory in Tuesday’s US midterm elections, traders are directing funds toward a group of stocks typically seen as beneficiaries under a left-leaning government, including clean energy shares.
According to Jinse Finance APP, as prediction markets bet that the Democratic Party will achieve a major victory in the US midterm elections held on Tuesday, traders are moving funds into a group of stocks typically classified by investors as beneficiaries under a left-wing government, including clean energy stocks.
Although clean energy stocks have experienced a five-month sell-off, resulting in most companies in the sector seeing year-to-date declines, on Tuesday, options trading volume for clean energy stocks — especially solar companies — soared significantly.
According to Cboe LiveVol data, the options trading volume for Invesco Solar ETF (TAN) on Tuesday surged to 40 times its usual level. The ETF typically sees fewer than 500 option contracts traded daily over the past month, but as of Tuesday afternoon, volume exceeded 20,000 contracts, with 99% being call options.
According to SpotGamma data, the most popular trading strategy for Invesco Solar ETF is buying December-expiry call options with a $50 strike price, at a premium of $0.80, betting on a 17% rise for the ETF. For options with a shorter expiry, $46 and $47 strike call options are also quite popular.
Among individual stocks, SolarEdge Technologies (SEDG.US) stood out, with its options trading volume expected to reach three times the average, with over 75% of trades being call options. The most popular trading strategy is buying call options expiring this Friday with a $35 strike price. The stock rose more than 6% on Tuesday and is set to report earnings before the market opens on Wednesday.
Charlie Moon, a trader at Chicago-based Prosper Trading Academy, said: "I’m bullish on solar stocks only when the White House is controlled by the Democratic Party. However, Enphase is definitely worth watching because there’s been some insider buying."
Bullish investors are indeed tentatively buying options on Enphase Energy (ENPH.US). The company’s share price fell 20% after last week’s earnings report but has since fully recovered and rose 9% on Tuesday. With options trading volume at twice the average, traders may have bought 8,600 call options, while put option volume was less than 900 contracts.
The most popular strategy for Enphase is buying January-expiry call options with a $35 strike price. Each contract costs $2.45, meaning that Enphase’s share price needs to rise 23% to reach the option’s breakeven point.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Competitor turns supplier as the "new owner"! Bank of America: Marvell Technology's acquisition of Lumentum may prompt Cisco and Ciena to seek other sources
Bank of America analysts stated that Marvell Technology's acquisition of Lumentum may prompt Ciena and Cisco to diversify their optical component suppliers.
Goldman Sachs traders warn of an "invisible bear market": S&P 500 is only 3% away from its all-time high, but 60% of its constituent stocks have entered bear market territory.
The S&P 500 Index is only about 3% away from its latest record high, but 60% of the constituent stocks in this benchmark index are deeply entrenched in bear market territory.
Iljin Display Faces Delisting Review as Improvement Period Ends
Crypto prices
More
