The S&P 500 rebounded Tuesday after seeing its worst trading day of the year on Monday. And according to one strategist, history is pointing to even more short-term gains.
"Given Monday's selloff, I'm looking for ways to profit from a potential pop," options expert Stacey Gilbert said Tuesday on CNBC's "Trading Nation."
Looking at a chart of the S&P 500 ETF, the SPY, Gilbert noted that there have been 39 instances since January 2010 where the market has closed down at least 2 percent. But it's what happens in the week after the selloff that's got Gilbert excited: In 24 of those 39 instances, the S&P has rallied an average of 3 percent in the five days to follow. (Tweet this)
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"I'm looking for a strategy to play for a quick pop similarly to what we've seen over the past four years," said Gilbert, head of derivative strategy at Susquehanna Financial.
Specifically, Gilbert looked to buy the SPY July 10 206/209 call spread for $1.57. "That's going to give us exposure between 206 and 209, and obviously we've seen the SPY trade within this range several times within the last year." Since buying a call spread is a bullish strategy where a trader will purchase a lower strike call and then sell a higher strike call to offset the cost, Gilbert's trade is targeting a move in the SPY to $207.57 by next Friday.
"This strategy gives me the potential to almost double my money with a [small] rally in the S&P 500 over the next nine days," added Gilbert.
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