While gold and silver have taken a backseat on the bull train in recent weeks, crude oil has been invited to sit front-and-center.

Since the beginning of February, the SPDR Gold Trust (NYSE:GLD) is down 1%, the iShares Silver Trust (NYSE:SLV) is unchanged, and the U.S. Oil Fund (NYSE:USO) is up more than 5%.

With the recent surge in crude, the energy sector has, not surprisingly, seen capital inflows — with many oil and gas names breaking out.

Traders looking to exploit continued upside in the energy space should consider selling put spreads on the Energy Select Sector SPDR (NYSE:XLE).  Bull-put spreads provide a higher-probability alternative to buying stock or call options.

Source:  MachTrader

Of course, in exchange for acquiring a higher probability of profit, the potential reward is smaller. Yet, many traders contend the reward is sufficient for the conservative among us, particularly because you get to collect this reward as soon as you initiate the trade.

The bull-put spread, or a put credit spread, consists of “selling to open” a higher-strike put while at the same time “buying to open” a lower-strike put in the same expiration month.  Because the option you sell will put more money in your pocket than you spend to buy the long option, you enter a bull-put spread for a net credit.

Your net credit, then, represents the max reward available. The max risk is limited to the distance between the option strike prices, minus the net credit received.

Let’s take a look at how to put this XLE options trade into action.

Currently you can sell the XLE March 72-68 put spread for around a 60-cent credit.  The exact credit received from the sale of the $72 put or the debit paid for the $68 put doesn’t matter, provided that your overall credit comes out to 60 cents when you make the trade.

At the time of this writing Tyler Craig had no positions on XLE.