Mike Khouw's Energy Select Sector SPDR (ETF) Hedge - SPDR Select Sector Fund - Energy Select Sector (ARCA:XLE)

Mike Khouw spoke on CNBC's Options Action

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about a way to hedge exposure in the energy space for traders who are worried about further declines. He suggested a put spread in Energy Select Sector SPDR (ETF) (NYSE: XLE) as a way to protect against losses.Specifically, Khouw would buy the September 70 put for $2.20 and sell the September 65 put for $0.70. The put spread would cost him $1.50 and he would get a protection below $68.50. The maximal protection would be $3.50.Khouw added that a lot of bad news is already in the market and at some point he is going to consider a bullish position in the energy space.