BJ's Restaurants has rallied more than 5 percent in 2017, but one trader is making a big bet that there could be trouble ahead for the stock.
The company reports earnings on Thursday April 27 after the closing bell, and according to Mike Khouw of Optimize Advisors, BJ's is "a stock that typically moves pretty sharply on earnings – 6.5 percent on average."
Khouw noted that the sentiment in the options market is siding with the bears ahead of its report. "[BJ's Restaurants] saw over 100 times the average daily put volume," Khouw said Tuesday on CNBC's "Fast Money."
It was one sizable trade that actually "pretty much tripled the open interest in [BJ's]," said Khouw. There was a buyer of 5,000 of the May 40/35 put spreads paying about $1 each. This is a bearish bet where a trader will buy a put and sell a put to offset the cost. The goal is for the stock to fall to that lower strike put by expiration, or in this case $35 in less than a month. That is a more than 15 percent decline from current levels.
Analysts polled by FactSet are expecting BJ's Restaurants to post earnings of 35 cents per share on $255 million in revenue.
More From Options Action
CNBC's Melissa Lee and the Options Action traders discuss the stocks they'll be watching next week.
A contrarian call on General Electric. GE's electric slide, with CNBC's Melissa Lee and the Options Action traders.
Trading Wal-Mart's winning week, with CNBC's Melissa Lee and the Options Action traders.
Mike Khouw of Optimize Advisors gives an overview of how to calculate the implied move for a stock.
Mike Khouw breaks down the critical options concept known as "theta."
What's a call spread, and when should you use it? Mike Khouw breaks down the basics of this critical strategy.
Options Action Newsletter:
Sign up to receive exclusive Options Action content. Each month you'll receive an exclusive message from host Melissa Lee and insight directly from one of the members of our Options Action panel. Keep your pulse on the market with the Options Action newsletter.