As the market bounces back, it may be high time for traders to buy portfolio protection. And that's just what one big options trader did, using the SPDR Financial ETF (which trades under the ticker symbol XLF).
In one of Thursday's biggest trades on that ETF, one options trader bought 25,000 December 21-strike puts for 17 cents per share.
Since a put allows a trader to sell a stock at a given time and price, this low-cost insurance will begin to provide protection if the XLF trades below $21, or about 8 percent below Thursday's closing price.
"There's an old saw in trading that your should buy the dips and sell the rips, but when it comes to hedging your portfolio, you probably want to look at doing the opposite—and a big institutional trader was doing that in the XLF today," Dash Financial's Mike Khouw said Thursday on CNBC's "Fast Money."