Trader makes $1 million bet that the retail run is done

Despite a huge rally in November and a strong start to the holiday shopping season, one options trader is making a big bet that the retail run could be coming to an end.

The XRT retail ETF surged more than 9 percent this month in its biggest monthly gain since October 2011. The move comes after what's been a relatively volatile year for the space.

"Interestingly, even as the volatility in the [XRT] has increased substantially, the price of the options hasn't [increased]," Mike Khouw of Optimize Advisors said Tuesday on CNBC's "Fast Money."

But as the ETF has rallied 12 percent since the election, Khouw noted that at least one trader is ringing the register on these stocks. In the specific trade, someone bought 15,000 of the January 45/42 put spread for 65 cents per options contract. This is a nearly $1 million bet that the XRT will fall anywhere from 3 to 9 percent by January expiration.

Relatively low options prices in conjunction with a seasonally weak period for the retail space shows "that [this trade] actually makes a lot of sense because it turns out that the [XRT] underperformed the S&P during the holiday shopping season, 7 of the last 10 years, by an average of about 1 percent," Khouw noted.

The XRT was trading at the $45 range during Wednesday's session.

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