Here’s how to make 533% by betting on ‘best sector to play’: Trader

Energy stocks have followed oil higher over the past few weeks, and one technical-minded trader thinks the runup will continue.

"Crude oil's looking good as the stock index has moved into all-time high territory," Todd Gordon of said Friday on CNBC's "Trading Nation." "Plus, we have the U.S. dollar starting to move lower following weak retail sales."

All in all, "it looks like the best sector to play right now is energy."

The XLE ETF, which tracks the energy sector, has rallied steadily since January and is now up almost 14 percent year to date. This is in sharp contrast to 2014 and 2015, when the XLE slid 10.6 percent and 23.8 percent, respectively.

Gordon sees a further push higher in the cards for XLE, which opened Friday trading at $68.50.

"I think the time is near to move into the next zone of resistance, which is around the $75 mark," he said. "So we have $70 that's set to break, and the next target in sight would be $75."

Gordon wants to buy the September 70-strike calls and sell the September 75-strike calls for 79 cents, or $79 per options contract. If XLE closes trading on Sept. 16 at or above $75, Gordon stands to make a profit of $421 per contract. Since his $79 would become $500, that would represent a profit of 533 percent.

But Gordon has also planned out what he will do if the chart doesn't go his way.

"If XLE were to break back below $67, I'm going to get out of this trade and protect what premium we have left to protect that risk," he said.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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