Traders are getting excited about Alibaba earnings

It looks like options traders are trying to get in on Alibaba ahead of the company's Thursday morning earnings report.

On Wednesday, more than two call options traded for every put option. Since call options gain value as a stock rises, while put options gain value as a stock falls, this could be seen as a sign that a high number of bullish bets are being placed.

In fact, out of the 20 most popular call or put options on any stock, two were Alibaba calls — specifically, the calls expiring on Aug. 18, with call prices of $160 and $165. Since Alibaba is currently trading at $159, and those calls expire Friday, traders buying these specific options are betting rather directly that the stock will rise on earnings.

This sort of action has not been relegated to Wednesday. Stacey Gilbert, head of derivative strategy at Susquehanna, noted Tuesday on CNBC's "Power Lunch" that the stock's options have been "incredibly popular" and that most investors appear bullish.

"There's aren't a lot of investors suggesting that they're concerned about a pullback," Gilbert said. "They like owning these options that have this embedded protection, but they want to have that upside exposure."

By "embedded protection," Gilbert means that those buying calls are not exposed to any losses the stock might see on earnings. A call simply grants its owner the right to buy a stock for a given price within a given time frame, not the obligation to do so.

To be sure, not every call trade is initiated by a bull. On Wednesday, many of the bigger trades in Alibaba appeared to pair the purchase of stock with the sale of an upside call. This structure, known as a "buy-write," offers a touch of extra income which can protect against downside, but in exchange for that, caps an investor's potential gains.

More generally, options prices are currently implying an expected move for the stock of 6 percent higher or lower, Gilbert said.

The Chinese online commerce giant is expected to report earnings of 93 cents per share on $7.1 billion of revenue, according to FactSet's compilation of analyst estimates.

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