Sliding crude oil prices have punished energy stocks. But one big trader appears to think it's high time to get in on the sector, in the form of the SPDR Energy Select ETF (ticker symbol: XLE).
In a huge trade Wednesday, one firm bought 10,000 of the December 90/95/100 call butterflies for 63 cents per share. This somewhat complex trade consists of the purchase of the December 90-strike call, the sale of two December 95-strike calls and the purchase of a December 100-strike call. The sweet spot for this trade is at $95, because at that level the trader will enjoy all the upside from owning the 90-strike call, without being punished by being short the 95-strike calls.
If the XLE is at $95 at December expiration, the trader will make $4.37 per share. Given that this trade was put on 10,000 times, for a total cost of $630,000, the trader could make $4.37 million—a $3.74 million profit in under two months.