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Why biotech’s biggest names could rally the sector

It could be a big day for the beaten-down biotech sector, with Amgen and Gilead report earnings after the bell on Thursday.

"If this sector's going to get back on its horse in a very difficult regulatory and political environment, it's going to need these big names to do it," options trader Dan Nathan of RiskReversal.com said Wednesday on CNBC's "Fast Money."

Amgen, Gilead and Celgene's combined weight make up more than 24 percent of the Nasdaq Biotech index, the IBB — which is still more than 30 percent off of the highs it hit last July. And according to Nathan, the implied moves for these stocks, when added together, represent a $12.3 billion market cap swing for the biotech sector.

Options traders use at-the-money put and call prices to estimate how much a stock is expected to move in response to a given event.

On Thursday before the bell, Celgene became the first mega-cap biotech name to report earnings. After opening sharply lower, the shares were up about 2 percent as of midday trading.

According to Nathan, Amgen is expected to rise or fall 3 percent when it reports earnings after the bell. Amgen shares have risen nearly 10 percent in the last two months.

Meanwhile, Gilead is expected to move 4 percent as well — slightly higher than its historical average over the last four quarters. A positive move for Gilead would add to the 13 percent run the stock has seen in the last two months.

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