Solar ETF TAN has been in rally mode lately, but tends to underperform in the second half of the year
The shares of the
Guggenheim Solar ETF (TAN) are up more than 20% year-to-date, and today touched a 2017 high north of $20, as traders continued to cheer the idea of a "
solar wall" along the U.S./Mexico border. However, the solar sector exchange-traded fund (ETF) could run into some speed bumps soon, if recent history is any indicator, and short-term options traders can pick up TAN contracts at a relative discount.
TAN is not only one of the
worst ETFs to own in the month of July, according to data from Schaeffer's Senior Quantitative Analyst Rocky White -- it also generates the worst returns in the
third quarter and the second half of the year, going back 10 years. Specifically, TAN averages a monthly loss of 1.35% in July, ending higher just 44% of the time. In the third quarter, TAN has lost 6.18%, on average, with a win rate of just 33%. In the second half of the year, the Guggenheim Solar ETF has dropped a whopping 15.95%, on average, with a win rate of 33% -- the worst of all ETFs on our list.
As alluded to earlier, TAN shares have been in rally mode since skimming the $17 level in April. However, the $19.50-$20 region acted as support for the ETF in the second half of 2016, but could now switch roles to act as resistance.
For traders expecting another slide for the fund in the short term, TAN's
near-term options are a relative bargain right now. The ETF's Schaeffer's Volatility Index (SVI) of 24% is higher than just 9% of all other readings from the past year, indicating low volatility expectations are being priced into short-term options, from a historical volatility standpoint.