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Options Action

How to make millions if oil doesn't crater

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Options Action: Bottom fishing in big oil

Oil has been on a winning streak recently, gaining almost 9 percent in one week. Now, one trader is trying to capitalize on the recent strength with an options strategy that will pay more than $1 million, as long as crude prices don't fall dramatically in the next few months.

On Thursday, one trader sold 55,000 MRO April 5-strike puts for 28 cents each for a total of $1.5 million in credit. This is a bet that Marathon Oil shares stay above $4.72 by April expiration, a threshold 36 percent lower than where the stock closed Thursday. If MRO manages to stay above $5, the entirety of that $1.5 million is retained by the trader.

Shares of the oil company were up more than 6 percent midmorning Friday, following the bounce in crude prices.

Read More Oil gains ease after Brent hits $37 on short covering

According to Dan Nathan of RiskReversal.com, selling put options is a good way to collect a high premium from investors who are worried oil prices will fall even further.

"One of the reasons this trader is probably looking to sell out-of-the-money puts [is that] the price of options, they're very elevated," Nathan said Thursday on CNBC's "Fast Money." "They probably have a long way to go if oil starts to settle."

Nathan also noted that Marathon Oil's stock has fallen steeply from its all-time high, trading near its all-time low of $6.52 that it hit in February.

"It's a bit of a mess," Nathan said. "If you think oil's going to settle and you think this balance sheet's OK," Marathon Oil is the place to sell put options.