For more reaction to options trading at the rally, click the link at the top of the page for Options Action LIVE featuring CNBC contributors Michael Khouw and Brent Kochuba alongside host Oliver Renick.
Stocks surged after the midterm elections brought a Democratic blue wave and options traders are responding by selling volatility and moving away from big tech deals.
The S&P 500 added just under 2% midday Wednesday, recouping losses from Friday and Monday. The evolution of the prices of the corresponding options was even more significant, with the Cboe Volatility Index falling about four points below 17, the volatility gauge’s biggest one-day drop since at least July.
Crude oil prices fell as WTI traded below $90 and energy stocks fell 5.6%, the biggest drop in the S&P 500. Options on the State Street Energy Select Sector SPDR ETF (XLE) surged to more than three times the 30-day average, with 57% put volume and the largest trades concentrated on put buyers bearish. The top trade on XLE was the 62.5 call option that expires Jan. 15, suggesting it could be a slow turnaround in what has been the best-performing sector of 2026, according to SpotGamma data.
With crude oil falling, a handful of trades linked to inflation and interest rates have attracted bullish attention. Consumer discretionary stocks rose nearly 5%, but options volume in the SPDR sector fund XLY was below average and volume was split between puts and calls, according to Cboe LiveVol data.
Instead, there have been big actions in a few housing trades, like Rocket Companiesthe mortgage lender and owner of Redfin, which fell nearly 50% this year before recovering last month. Options volume on Rocket was double the average with a strong bullish bias. Of the 110,000 options traded, 90% were calls and more were likely initiated by buyers than sellers. The bulls traded the most as the 14 and 16 strike calls expired on November 20.
Countering the decline in crude oil was a rally in solar energy companies, extending recent gains and continuing the unusual options activity that preceded the midterm elections.
THE Invesco Solar ETF (TAN) added another 9%, trading at its highest since July. Options volume was more than five times the average and 80% of the volume was in calls. The most popular trade in TAN was the 48 strike call betting on a 6% rally through November 20.
On the tech side, options flows looked bearish VanEck Semiconductor ETF (SMH)which fell 2.6% to the lowest since May. Options volume was twice average at 70% of puts, with the 475 strike put expiring on November 13 being the most popular contract purchased in volume.
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