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Here’s why traders are expecting big moves out of biotech this week

The busiest week for earnings kicks off on Monday, and investors are eyeing one group in particular: biotech.

The biotech ETF, IBB, is up more than 22 percent this year and just posted its best week in a month. The ETF could continue to rally when the top names in the group report earnings this week. Amgen and Biogen kick off the foray on Tuesday, Gilead and Vertex report on Wednesday and Alexion and Celgene on Thursday. Together, those stocks make up more than 30 percent of the ETF.

"Biotech has underperformed [the Nasdaq] for about a year and a half. They just picked up. I think it's important to remember that these stocks move around [on earnings]," Dan Nathan of RiskReversal.com said Friday on CNBC's "Options Action."

Furthermore, heading into earnings, "one of the places where you see names that see a lot of options activity tends to be biotech," added Mike Khouw of Optimize Advisors.

The options market is implying some large moves for the biotech names that are reporting this week. Traders are anticipating Alexion to see the biggest move on earnings, about a 6 percent move in either direction. Biogen is expected to move 4.2 percent, Gilead could see a move of 3.9 percent, Celgene is expecting a 3.3 percent move, and Vertex could move about 3.2 percent. Amgen is expected to see the smallest move of 2.7 percent in either direction.

If all of these biotech names move according to their implied earnings moves, that would be about a $16 billion total market cap shift.

Khouw is specifically targeting Celgene for a breakout. "[Celgene] finally seems like it's starting to move after trading sideways all this time, and right now is a good time to take advantage of options prices being low," he said. He recommended buying the September 140 calls for $3.80, looking for a move above $143.80, or roughly 4 percent above its current stock price, by September expiration. "This is a way to capture earnings," he added.

The IBB was trading at the $326.07 range by midday Monday.

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