On CNBC's "Options Action," Mike Khouw spoke about an options strategy that he would use to get a long exposure in the energy space after a sharp move higher.
He said that crude oil inventory is still incredibly high and he thinks that it won't trade significantly higher until the inventory declines.
Instead of trading crude oil, he would consider making a modestly bullish bet in Schlumberger Limited. SLB, which is the strongest company in the oil service space. Khouw added that the company is cash flow positive and it makes money even when crude oil prices are low.
To make a bullish bet, he wants to sell the March 67.50 put for $2.50. If the stock drops to $67.50 at the March expiration, he would have to buy it at $65 or 7.5 percent lower from its current price level.
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