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Traders bet on huge rally for Shake Shack

Bet on a Shake Shack rally?
Bet on a Shake Shack rally?

Investors are lining up for Shake Shack.

Shares of the burger chain are up 12 percent in the last week as investors await the company's earnings report Thursday after the bell. The stock has been a Wall Street whirlwind since its late January 2015 IPO, initially surging more than 100 percent to $96.75 a share, only to fall nearly 50 percent to its current price of around $49. And some traders are betting on even more volatility following its results.

"The options market is expecting a move of about 9 percent between [Thursday] and Friday," Mike Khouw told CNBC's "Fast Money" on Wednesday. Khouw noted that the implied move this quarter is nearly double the average since the IPO.

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According to Khouw, the options market has been buzzing about Shake Shack this week, with call volume on Wednesday running more than two times its daily average. There was also a flurry of bullish bets surrounding the stock's 50-strike calls. Specifically, those traders purchased the November weekly 50-strike calls at an average price of $1.65. Since buying a call options allows one the right to purchase a stock at a set price and given time, these are bullish bets that Shake Shack will rise above $51.65 by Friday.

"Based on where the stock is trading, that means these traders are essentially betting that Shake Shack will be up at least [3] percent, and likely much more, by Friday," added the Optimize Advisors co-founder.

Shake Shack is set to report its fiscal 2015 third quarter earnings report Thursday after the bell. Analysts polled by FactSet are expecting the company to earn 7 cents per share on $47.3 million in revenue.