Energy stocks are getting crushed this year, and the pain is far from over, at least according to one trader.
The oil and gas ETF, XOP, is down nearly 22 percent in 2017, and the options market has been piling into bearish bets on the group.
One trade that stuck out on Tuesday was a bearish call that the XOP would fall by at least 6 percent in the next six weeks. Specifically, a trader sold out of 25,000 of the June 32/26 put spread and then bought to open 10,000 of the July 32-strike puts for 90 cents.
That trader is betting that XOP will close below $31.10 by July expiration. The ETF was trading around $32.35 on Wednesday afternoon.
Of the trade, Dan Nathan of RiskReversal.com told CNBC's "Fast Money" on Tuesday that the person was probably "rolling out some bearish positioning or possibly a hedge."
While XOP has fallen to 10-month lows, "crude oil is still up about 25 percent from its 52-week lows. It's trading really well on a relative basis to [XOP]," Nathan said. "That's telling you something about how investors feel about the stocks in general."
XOP "is a bit of a train wreck here. It obviously was in a massive downtrend. It broke out, and now it's kind of failing," according to Nathan.
Shares of XOP were down nearly 2 percent on Wednesday while crude had fallen 3 percent.