Options Trader Bets That XLE Will Drop At Least This Much By March Expiration

Crude oil prices dropped on Wednesday amid concerns over surging COVID-19 cases in China, the world’s top oil importer. This resulted in a sharp drop in energy stocks, including, EQT Corporation EQT, APA Corporation APA, Coterra Energy Inc. CTRA and Devon Energy Corporation DVN.

On CNBC’s "Options Action," Dan Nathan of RiskReversal Advisors said there were 3x more puts than calls on Energy Select Sector SPDR Fund XLE on Wednesday.

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There was a buyer of 30,000 of the March 65/55-put spreads at an average price of 55 cents per contract, Nathan mentioned.

The trader expects the Energy Select Sector SPDR Fund to decline at least 36% by March expiration.

XLE Price Action: The Energy Select Sector SPDR Fund dropped 2.2% to close at $86.02 in regular trading session on Wednesday, and lost another 0.1% in after-hours trading.

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