The biotech sector could be on its way down, according to an options trade that sees the sector dropping 3 percent by October.
On Monday, when the S&P biotech ETF was trading at $65, one trader bought 5,000 of the October 63-strike puts for $1.84 each or $184 per options contract. This means that the trader sees XBI moving down to $63 or lower by October expiration.
But Dan Nathan of RiskReversal.com makes clear that the trade may not be entirely bearish, and the trader could in fact just be buying protection in light of a potentially volatile market.
"Maybe you want to buy some protection into what could be headwinds with these presidential debates coming out," he said Monday on CNBC's "Fast Money."
Nathan also charts the XBI to show that the ETF may actually not see too much of a downside even if it does fall. On a one-year chart of the XBI, Nathan points out that the ETF had in fact broken out of a consolidation over the past few months to hit $65.