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Traders seek protection ahead of Facebook earnings

Facebook is losing friends ahead of earnings, at least in the options pits.

On Tuesday, when Facebook's stock was at $76 per share, one trader bought 1,500 February 69-strike puts for 93 cents. Since buying a put gives you the right to sell a stock for a set price at a given time, the trade is profitable if Facebook drops below $68.07, or around 10 percent lower, at February expiration.

"When you think about what's going on [in the market] when stocks like Microsoft are declining 10 percent after earnings, maybe some traders are reaching for way out-of-the-money protection in case of a disaster," RiskReversal.com's Dan Nathan said Tuesday on "Fast Money."

Tech earnings have been a mixed bag. While investors cheered results from Apple and Yahoo, they took shares of Microsoft to the woodshed despite results that were in line with expectations. Microsoft's sharp post-earnings selloff could have some Facebook investors looking for protection against a downside surprise.

Read More Stocks rise at midday after strong Apple, Boeing results

Current put and call prices are implying about a 6.5 percent move for Facebook shares when the social media giant reports after the closing bell Wednesday. That's about the average move for the stock post-earnings over the past four quarters.

Facebook has been an outperformer in the past year, up nearly 40 percent while rivals Twitter and Google are down 37 and 8 percent, respectively. If Tuesday's big trade is profitable, it would mean Facebook shares would hit lows not reached since July.

Wall Street expects Facebook to earn 48 cents per share, up from 31 cents a year ago, and $3.8 billion in revenues in its fiscal fourth quarter earnings, according to FactSet.

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    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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