Dan Nathan's CSX Options Trade

Dan Nathan suggested on CNBC's Options Action a bearish trading idea in CSX Corporation CSX. He explained that the stock jumped 80 percent from its 52-week low in February and it gained around 20 percent since the election. It has significantly outperformed the Dow Jones Transportation index in that period and Nathan thinks that it is reasonable to expect a pull back.

CSX is going to report earnings on January 17, but instead of trading earnings, Nathan wants to place a little bit longer term position, because the stock is currently trading at its resistance, which is at the same price level as the double top from 2015. To place a bearish bet, Nathan wants to buy the May 38/33 put spread for $1.50. The trade breaks even at $36.50 or 5.93 percent below the current market price and it can maximally make a profit of $3.50.