Crude oil is stuck in gridlock this year, trading in a tight $2 (S$2.82) range between $52 on the low end and $54 on the high end, but a more than 1 per cent rally on Thursday helped one quick trader make a cool quarter million dollars in just 24 hours.
Wednesday on CNBC's "Fast Money," RiskReversal.com's Dan Nathan highlighted a bullish short-dated options trade on the energy ETF, XOP - a buyer of 5,000 of the February 39.5-calls for 31 cents per options contract. The breakeven for the trade is $39.81.
"When I see options activity in an ETF like the XOP [with] low premium, not a lot of commitment [and] short dated, this is obviously a trader looking to pick a spot out of trend a play for a near-term momentum higher," Nathan explained.
And that near-term momentum played out Thursday as the XOP rallied nearly 2 per cent to roughly $39.83.
Now, those February 39.5 calls are worth around 80 cents, meaning the trader made a swift $250,000 on the trade.
Energy is one of the worst performing sectors this year, down more than 4 per cent, however Nathan does see more upside in this space.
"[The XOP] is an equally weighted ETF, so not like the XLE which is 30 per cent Chevron and Exxon, I think the biggest weighted stock in this ETF is about 3 per cent," he said. "It looks ready for a poised move higher."