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Traders bet on big earnings surprise for Snap

Snap is soaring ahead of its earnings Tuesday after the bell, and traders are expecting an even bigger move for the stock following its report.

Since Snap's IPO on March 2, shares have fallen more than 12 percent. As the company gears up for its third earnings report as a public company, the options market is implying about a 13 percent move in either direction.

Dan Nathan of RiskReversal.com pointed out on CNBC's "Options Action" on Monday that after past earnings reports, Snap shares fell steeply the following day. The stock tumbled 21 percent the day following its first report and 14 percent following its second report.

In comparison, rival Twitter also saw very large moves following its first two earnings reports. Shares dropped 24 percent following its first earnings report in February 2014 and then fell 9 percent after its second report. Meanwhile, Facebook's stock sunk 12 percent after its first earnings release, but then jumped 19 percent after its second.

Nathan pointed out that the implied move of about 13 percent, or $2, could potentially place the stock at around $17. "If you look at this chart, $17 is significant. That was the IPO price, [and] that was also the September high. That $2 from here looks to be resistance, [and] the September low is also $2 lower."

On Monday, the most active strikes were the Nov. 10 weekly 20 and 21 calls, meaning traders see Snap shares closing above $20 by Friday, which is 30 percent higher than Tuesday's trading price.

According to FactSet, analysts are expecting Snap to report an earnings loss of 33 cents on $237 million of revenue.

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