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Why Facebook earnings will be so interesting

Traders are bracing for big moves for Facebook earnings, and if history is any indication, they're likely to get it when the social media giant reports earnings after Wednesday's trading day.

According to analysis by Mike Khouw, options prices are implying a 7 percent move for Facebook when it reports. However, according to Khouw's work, it's what happens after earnings that makes the stock so interesting.

"Over the course of the month, after earnings this thing usually moves about 15 percent one direction or the other," said Khouw, a CNBC "Options Action" contributor.

Facebook has well outpaced the broader market, up 40 percent in the past 12 months while the Nasdaq composite and S&P 500 are up a respective 22 and 13 percent. That move has stretched Facebook's valuation. According to FactSet, Facebook trades at 38 times its estimated forward earnings. But some aren't ready to say the stock is overpriced just yet.

"What is interesting about the valuation here is that we haven't seen multiple expansion in Facebook like we have in almost every other part of the market," said Khouw. "Revenues actually outpaced the stock price growth over the course of the last couple of months. So I'm not going to call the stock cheap."

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Facebook's charts show some promise in the next few days, according to Carter Worth, head of technical analysis at Cornerstone Macro.

"Facebook was weak with the market [Friday] but the position it's in suggests that the earnings can be good and that the stock can respond to the upside," said Worth. He sees the stock holding an uptrend that has been in place for over a year and potentially breaking above heavy resistance at $86 per share.

"We think it bounces off the top and actually goes on to make a new high," Worth said.

To play Facebook to the upside ahead of earnings, Khouw is looking at the stock's 82.50-strike calls. Those expiring on May 15 now trade at $3.05 each. Thus a buyer of those calls would need the stock to move above $85.55, or about 4 percent higher than where it was trading Monday morning. A call gives its purchaser the right to buy a stock at a fixed price by a given date.

DISCLOSURE: Khouw does not have an individual position in Facebook.

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

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