The S&P 500 has been flirting with record highs for months. But despite a series of relatively positive earnings, one trader who looks closely at both the charts and the options market says stocks may have run out of steam in the short term.
On CNBC's "Trading Nation," Andrew Keene said Thursday he doesn't see the S&P 500 trading outside of its current range.
"Every time we sell off, we find buyers. And every time we rally, we see sellers," the founder of Keene on the Market said. "I don't think we're looking to break out."
Midday Thursday, the S&P 500 was less than 10 points away from its high of 2,119, which was hit in late February, but despite the market's proximity to new highs, Keene said it's looking a bit "frothy."
"I think we could potentially sell off," he said.
So to play for potential downside in the S&P 500, Keene turned to the options market. "I'm looking to sell a call spread here in the S&P 500 ETF." Selling a call spread is a mildly bearish strategy where a trader will sell an option to buy, and then buy a higher strike call at the same expiration.
The goal of the trade is to collect the price of the options that were sold.