Strategy takes dim view of energy ETF

The SPDR Energy Index Fund is outpacing the broader market to the downside today, and a large option trader is looking for more of the same.

The XLE is down 1.27 percent to $66.25 this afternoon after trading above $68 just on Tuesday, its highest level since May 4. The exchange-traded fund has been trending lower from above $76 in February but bounced off support and 2012 lows around $62 last week.

More than 64,000 XLE options have already changed hands today, more than 50 percent greater than its daily average. Topping that action is a large put spread , according to optionMONSTER's Depth Charge system.

A trader bought 10,000 July 65 puts for $0.63 while selling 20,000 July 62 puts for $0.18. The volume at each strike was more than open interest, indicating new activity.

This ratio spread costs just $0.27 to open, which is the amount at risk if the trader holds the position through expiration and the XLE remains above $65. The maximum gain will come if the XLE is right around $62 at that time, much of it through time decay . Below that level the trader faces assignment and the obligation to buy shares. (See our Education section)