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Dan Nathan's Energy Select Sector SPDR (ETF) Trade

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CNBC Options Action's Dan Nathan said on the show recently that major oil companies should bounce after a big sell off.

Nathan wants to use options to trade Energy Select Sector SPDR (ETF) (NYSEARCA: XLE) because, he remarked, he's expecting the stock to trade higher in the near term and volatility to decline.

On Friday, he bought the November 87/92/97 butterfly and paid $1.50 for this trade.

He bought the November 87 call for $3.60, sold two November 92 calls for a total of $2.30 and bought the November 97 call for $0.20.

Nathan's maximal profit is $3.50 and he would earn it if the ETF trades close to $92 at the November expiration. The trade would lose money if shares trade below $88.50 or above $95.50.

The ETF fell 0.15 percent on Friday and closed at $88.17.

Posted-In: CNBC Dan Nathan Options ActionMedia


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