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Options Action: Energy Sector

Energy traders keep insisting thatoil stocks related to the gulf spill have been oversold. But the situation seems to get worse not better.

How should you position?

Considering it's still unknowable what the ultimate impact will be, Mike Khouw of Cantor Fitzgerald suggests hedging long positions using options. Here's an example using Halliburton.

His HAL trade follows:
Sell the July 25 put @ $1.65

How Mike's Trade Makes Money
Get Long Stock At $25
Profits Above $23.35
Losses Below $23.35

Learn more about this trade. Watch the video now!



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Trader disclosure: On May 24, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (BAC), (BX), (AAPL), (RTP) (F), (IBM); Karabell owns (GS), (C); Jon Najarian owns (AXL); Grasso Owns (BP), (NDAQ), (DYN), (LPX), (ASTM), (ABK), (BAC), (C), (JPM), (X); Adami Owns (C), (GS), (INTC), (MSFT), (NUE), BTU); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (ACL); Finerman's Firm Owns (ARG) Calls; Finerman's Firm Owns (BAC), (BAC) Calls; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (BP) Calls; Finerman Owns (GOOG); Finerman Owns (GS) Calls ; Finerman's Firm And Finerman Own (IBM); FInemran's Firm Owns (KFT); Finerman Owns (WFC) Preferred; Kelly owns (CAT) puts; Kelly owns (EMN) puts; Kelly owns (WYNN) puts; Kelly owns (EXPE) puts; Kelly owns (SPY) puts

For Mike Khouw
Cantor Fitzerald & Co. Is A Market Maker In (AAPL)
Cantor Fitzerald & Co. Is A Market Maker In (AMD)
Cantor Fitzerald & Co. Is A Market Maker In (BAC)
Cantor Fitzerald & Co. Is A Market Maker In (C)
Cantor Fitzerald & Co. Is A Market Maker In (DWA)
Cantor Fitzerald & Co. Is A Market Maker In (F)
Cantor Fitzerald & Co. Is A Market Maker In (FCX)
Cantor Fitzerald & Co. Is A Market Maker In (FNF)
Cantor Fitzerald & Co. Is A Market Maker In (GOOG)
Cantor Fitzerald & Co. Is A Market Maker In (GS)
Cantor Fitzerald & Co. Is A Market Maker In (IBM)
Cantor Fitzerald & Co. Is A Market Maker In (INTC)
Cantor Fitzerald & Co. Is A Market Maker In (JEF)
Cantor Fitzerald & Co. Is A Market Maker In (JPM)
Cantor Fitzerald & Co. Is A Market Maker In (MS)
Cantor Fitzerald & Co. Is A Market Maker In (QQQQ)
Cantor Fitzerald & Co. Is A Market Maker In (S)
Cantor Fitzerald & Co. Is A Market Maker In (SPY)
Cantor Fitzerald & Co. Is A Market Maker In (T)
Cantor Fitzerald & Co. Is A Market Maker In (WFC)
Cantor Fitzerald & Co. Is A Market Maker In (X)
Cantor Fitzerald & Co. Is A Market Maker In (XLF)
Cantor Fitzerald & Co. Is A Market Maker In (YHOO)

For Brian Kelly:
Kanundrum Capital Owns U.S. Dollars
Kanundrum Capital Owns (TLT)
Kanundrum Capital Owns (GLD)
Kanundrum Capital Owns (GFI)
Kanundrum Capital Owns (AUY)
Kanundrum Capital Is Short (EXPE)
Kanundrum Capital Is Short (CAT)
Kanundrum Capital Is Short (EMN)
Kanundrum Capital Is Short (XLK)
Kanundrum Capital Is Short (XLF)
Kanundrum Capital Is Short (WYNN)
Kanundrum Capital Is Short (CME)
Kanundrum Capital Is Short (FXI)
Kanundrum Capital Is Short (RSX)
Kanundrum Capital Is Short (USO)

For Dennis Gartman:
Funds Managed By Gartman Own (GLD)
Funds Managed By Gartman Are Short Sterling, Euros
Funds Managed By Dennis Gartman Own (AAPL)

For Whitney Tilson:
Funds Managed By Whitney Tilson Are Short (ITB)

For Steve Grasso:
Stuart Frankel And Its Partners Own (NYX)
Stuart Frankel And Its Partners Own (TRV)
Stuart Frankel And Its Partners Own (SDS)
Stuart Frankel And Its Partners Are Short (QQQQ)
Stuart Frankel And Its Partners Are Short (AAPL)

For Mark Mahaney:
Employees Of Citigroup Own (GOOG), (YHOO)
(GOOG), (YHOO), (AMZN), (EBAY) Are Or In Past 12 Months Were Non-Investment Banking Clients Of Citigroup Global Markets
Citigroup Global Markets Or Affiliate record non-investment banking compensation from (GOOG), (YHOO), (AMZN), (EBAY) in past 12 months
Citigroup Global Markets And/or Affiliates has a significant financial interest in relation to (GOOG), (AMZN), (EBAY)
Citigroup Global Markets Or Affiliates owns 5% or more of (YHOO)
Citigroup Global Markets Is A Liquidity Provider In (GOOG), (EBAY)
Citigroup Global Markets or affiliates owns 1% or more of (YHOO)
Citigroup Global Markets or affiliates owns 1% or more of (AMZN)
Citigroup is a market maker in (GOOG)
Citigroup is a market maker in (YHOO)
Citigroup is a market maker in (EBAY)
Citigroup is a market maker in (AMZN)

Other Relevant Disclosures:
Finerman's Firm And Finerman Owned (JPM) On 4/12/10

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