The Dow opened lower on Friday morning, but one stock surged nicely into the green: Boeing. This after news that the Federal Aviation Administration is soon expected to approve Boeing's plan to fix its 787 Dreamliner, which will end the grounding of the aircraft.
One options trader got into the trade ahead of time. When Boeing was trading at $87, this trader bought 294 August 85-strike calls for $5.25. This is a bullish bet that the stock will be above $90.25, or 3.7 percent higher, by August expiration.
(Read More: Ban on Boeing 787 Dreamliner Flights Could End Soon)
Trades like this are a good example of how one can replace a long stock position with a call option. Investors who are uncomfortable with the market volatility this week can sell a stock and then buy one in-the-money call for every 100 shares sold.
The result of this trade is a position that will profit if the stock continues to rally this summer, but will only expose an investor to limited losses should the market sell off. The downside of this kind of protection is that the stock must overcome the extrinsic value of the calls, also known as their time premium. Let's use this case as an example: While a stock position bought at $87 would have a break even at $87, the call position would have a break even of $90.25, which is 3.5 percent higher.
However, a look at Boeing's fundamentals suggests that this may be a good stock to bet on this summer. Investors have been wary of the stock since mechanical problems caused the Dreamliner to be grounded. But as noted, U.S. regulators are expected to end the grounding and allow the Dreamliner to return to service.
(Read More: Airbus Comes to US, Puts More Pressure on Boeing)
Boeing's customers know that that the early production run for a new product like the Dreamliner is likely to have glitches, and that these tend to get sorted out in the first few months. That is the process Boeing is completing now, and it is unlikely to affect the future earnings power of the Dreamliner, which is expected to generate positive cash flow next year and for years to come. Wells Fargo estimates that the Dreamliner will cause Boeing's free cash flow to double next year to $12, or 14 percent of Boeing's share price. This makes a dividend increase likely next year, and also makes Boeing's shares a good buy at current levels.
Buying a call now on Boeing will ensure that investors do not miss a run-up in the stock over the summer, but it will not subject them to all of the downside that the shares could see if the market sells off hard, as it has this week.
—Brian Stutland is Managing Member of Stutland Equities and a contributor to CNBC's "Options Action."