Options traders are betting heavily on these stocks ahead of election results

Daniel Bosma | Moment | Getty Images

With prediction markets pricing in a big victory for Democrats in Tuesday's midterm elections, traders are leaning into a group of stocks that investors often categorize as beneficiaries of left-wing leadership.

Options trading in clean-energy stocks, particularly solar companies, surged on Tuesday, despite a five-month sell-off in the group that's left most of the companies in the industry group down on the year.

Volume in the Invesco Solar ETF (TAN) surged to 40 times higher than usual Tuesday, according to Cboe LiveVol data. The fund, which typically trades fewer than 500 contracts a day the past month, traded more than 20,000 contracts by midday, and 99% of them were calls. The ETF rallied more than 400% from its pandemic low through the 2020 election before giving almost all of the gains back by April last year.

Invesco Solar ETF (TAN), YTD

The most popular trade in TAN was buying the 50-strike call for December expiry for 80 cents and looking for a 17% rally, according to SpotGamma data. For nearer expiry, the 46 and 47-strike calls were also popular.

Among individual stocks, SolarEdge Technologies stands out, on pace for three times higher-than-average volume and more than 75% of trading in calls. The company reports earnings before the bell tomorrow and rallied more than 6% Tuesday. The most popular trade was buying the 35-strike call expiring Friday.

"I would only like solar if blue was in the White House," said Charlie Moon of Chicago-based Prosper Trading Academy. "But Enphase does stands out with some insider buying."

Bulls were indeed dabbling in Enphase Energy, whose stock fell 20% after earnings last week but have fully recovered since and rallied 9% Tuesday. On volume twice the average, traders likely bought 8,600 calls, compared to under 900 puts.

The most popular trade in Enphase was to buy the 35-strike call expiring in January, a trade that costs $2.45 per contract and needs Enphase to rally 23%.