Trader bets $1.5 million on CBS earnings

Options Action: Big moves for CBS

One trader made a massive bet ahead of CBS Corporation's earnings report that the stock could soon be off to the races.

On Wednesday, when options volume ran eight times its average daily volume, one trader bet nearly $1.5 million that CBS' stock could break out to a five-month high by next week. Specifically, the trader bought 12,000 of the February 57-strike calls for $1.23. Since a call gives one the right to buy a stock for a price at a given time, this trader is betting that CBS will be above $58.23 by February expiration, or 2.5 percent higher by Feb. 20. Since each contract controls 100 shares, each contract cost $123. Multiply that by 12,000 and you get $1.47 million.

The $58 per share level represents a key technical level for CBS, which reports earnings Thursday afternoon. "When you look at a chart, you see the stock has been increasing a little bit and is bumping up against the 200-day moving average and it has this increasing 50-day moving average," said Dan Nathan, editor and founder of and a CNBC contributor. "It looks like it could be setting up for a technical breakout on better than expected results."

Media stocks have been a mixed bag recently. Disney and Time Warner have rallied a respective 14 and 6 percent in the past three months, while Viacom is down 2 percent and Twenty-First Century Fox is flat over that time. That uneven performance could have some investors looking to lighten up on CBS stock while still retaining economic exposure via the options market.

"This trade could be a stock replacement trade, where the trader is coming out of those shares and replacing his bullish view with the 12,000 calls, or it could be a volatility play," said Nathan, who also noted that the call purchase came amid a block sale of 600,000 shares. To note, 12,000 option contracts controls around 1.2 million shares of stock.

Wall Street expects CBS to earn 76 cents per share on $3.65 billion on revenue in the company's fiscal fourth-quarter, according to FactSet.