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Here’s how one trader is playing more expected Dow records

The Dow Jones industrial average hit another intra-day all-time high on Monday, and one trader is betting on more gains ahead for the index.

According to Todd Gordon of TradingAnalysis.com, the chart of the Dow-tracking ETF, the DIA, is showing signs of another breakout on the way, though the exact time frame is unclear.

"We had a bit of consolidation here following the nice runup in May into June," Gordon said Monday on CNBC's "Trading Nation," "So the question is when will this market break exactly on the top side? That's tough to tell. I do think we will, once this consolidation is over, begin to resume on the top side."

Given the uncertainty about when the Dow's next rally could occur, Gordon uses a "diagonal" options trade, in which the strike prices remain the same but the expirations are staggered to hedge for an unpredictable time frame.

Gordon is buying the August monthly 215-strike call, which expires on Aug. 4, for $1.83 and selling the July monthly 217-strike call, which expires on July 21, for 45 cents.

"It's a little bit of a different concept, but it's a nice one to employ when it's a quiet market and you don't know exactly when the market is going to break," Gordon said.

The Dow is currently up 9 percent year to date, and as of Monday was up for its seventh consecutive session.

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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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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