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Trader bets $6.5M against this hot sector

When it comes to the market trends so far in 2016, what was once hot is suddenly not.

The consumer discretionary sector, which was the best-performing sector in 2015 thanks to the outperformance from high fliers like Amazon, Nike, McDonald's and Starbucks, has fallen 4 percent in the last six trading sessions. According to one trader, the volatility will continue in the space throughout the year.

"We know consumer discretionary is heavily loaded with Amazon, Nike, Starbucks and a lot of names that perform very well, but the [XLY] ETF [that tracks the sector] is now [nearly] 10 percent from those 52-week highs," Dan Nathan told CNBC's "Fast Money" on Monday.

Nathan noted a bearish trade where someone spent $6.5 million on a bet that the ETF will fall as much as 18 percent by the middle of the year. Specifically, that trader closed an existing bearish position in order to purchase 30,000 of the June 69/61 put spreads for $2.10.

Buying a put spread is a bearish strategy where someone will purchase a put and then sell a lower strike put against it to offset the cost. The goal is for the stock or ETF to fall to the put that you are short or in this case to $61 by June expiration.

"I think that this is likely not an outright bearish bet but more of a protection play," said the RiskReversal.com founder. "If you look at a one-year chart you'll see a bounce at $74, which is good support," he added.

Consumer discretionary was the best performing S&P 500 sector midday Tuesday, up nearly 1 percent.

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    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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