Trader bets on slam dunk for Time Warner

Time Warner shares are just about flat after the company beat expectations. But one trader is hoping the stock will rally in the next few days.

Shares in the media giant are up 6 percent over the last three months. Even before It reported better-than-expected profit helped by Turner Sports' "March Madness" coverage, traders were looking forward to a slam dunk.

On Tuesday, bullish bets in the options market outpaced bearish ones by a ratio of 10-to-1. According to options expert Mike Khouw, that was in anticipation of a post-earnings rally.

"This is a name that typically moves a little under 3 percent on earnings," said Khouw, a CNBC contributor. Meanwhile, the options market was "implying that it [was] going to move a little bit more than that."

Read More Turner, HBO drive Time Warner revenue beat

Time Warner building, New York.
Scott Mlyn | CNBC
Time Warner building, New York.

It was also on Tuesday that a trader wagered that Time Warner would make a typical move. Specifically, the trader bought 1,065 contracts of the 84.50-strike calls expiring May 1 for $2.24 each. To pay for the transaction, the trader simultaneously sold 2,130 of the 87.50-strike calls for 79 cents each.

Since each contract controls 100 shares, the trader is betting $70,290 that Time Warner stock will reach as high as $87.50 or 3 percent higher than Tuesday's close in a little more than two weeks. If the shares hit that price by May 15, the trader stands to make a profit of $249,210 or more than 3 ½ times the total premium paid.

A call is a bullish option giving the purchaser the right to buy a stock at a set price within a specific time frame.

Though shares in Time Warner have outpaced the S&P 500 over the last 90 days and have soared 37 percent in the last 12 months, the stock is down nearly 1 percent since the start of 2015.

On Wednesday, the company reported 5 percent growth in revenue compared to last year but, although earnings beat expectations, profit is down 25 percent or $320 million from this time last year.

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