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

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) 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.