After a five-month selloff, is a turnaround finally in sight? On expectations of a Democratic victory, funds are betting on a rebound in clean energy stocks, with options trading volume surging.

Title context: After a five-month selloff, is a turnaround finally in sight? On expectations of a Democratic victory, funds are betting on a rebound in clean energy stocks, with options trading volume surging. Text: As prediction markets bet on a major Democratic victory in Tuesday's U.S. midterm elections, traders are putting money into a batch of stocks typically categorized by investors as beneficiaries of a left-leaning governing environment, including shares such as Clean Energy Fuels Corp. Although shares such as Clean Energy Fuels Corp. have endured a five-month selloff that has left most companies in the sector with year-to-date share price declines, on Tuesday options trading volume in Clean Energy Fuels Corp. shares, especially those of CECEP Solar Energy companies, still surged sharply. According to Cboe LiveVol data, options trading volume in the Invesco CECEP Solar Energy ETF (TAN) soared to 40 times normal levels on Tuesday. Over the past month, the fund typically traded fewer than 500 options contracts per day, but by midday Tuesday volume had exceeded 20,000 contracts, of which 99% were call options. According to SpotGamma data, the most popular trading strategy in the Invesco CECEP Solar Energy ETF was buying December-expiry call options with a strike price of $50 for a premium of 80 cents, betting on a 17% rise in the ETF. For shorter-dated options, calls with strike prices of $46 and $47 were also popular. Among individual stocks, SolarEdge Technologies (SEDG.US) stood out in particular, with its options trading volume expected to reach three times the average, of which more than 75% of trades were call options. The most popular trading strategy was buying Friday-expiry call options with a strike price of $35. The stock rose more than 6% on Tuesday and is due to report earnings before the market opens on Wednesday. Charlie Moon, a trader at Chicago-based Prosper Trading Academy, said: "I would only be bullish on CECEP Solar Energy stocks if the White House is controlled by Democrats. Still, Enphase is indeed worth watching because there have been some insider purchases of the company's stock." Bullish investors are indeed tentatively buying options in Enphase Energy (ENPH.US). The company's shares fell 20% after reporting earnings last week but have since fully recovered and rose 9% on Tuesday. With options volume at twice the average level, traders may have bought 8,600 call options, while put volume was less than 900 contracts. The most popular trading strategy in Enphase was buying January-expiry call options with a strike price of $35. The trade costs $2.45 per contract, meaning Enphase's stock price would need to rise 23% to reach the option's break-even point.