Twitter shares are soaring, and the stock could see a bigger move when it reports this week

Twitter shares surged 5 percent on Wednesday, placing the stock on track for its best day since mid-June.

The move comes ahead of its quarterly earnings report on Friday morning; the options market is predicting a double-digit move for shares of the social media platform. Twitter has surged a whopping 84 percent in 2018.

Stacey Gilbert, head of derivative strategy at Susquehanna, told CNBC’s “Trading Nation” on Tuesday that Twitter’s move is expected to be relatively in line with previous quarters, even after its big run in recent months. Here’s why.

• The options market is pricing in a move somewhere between 11 and 12 percent, which is more or less in line with how Twitter shares have moved on a close-to-close basis over the last couple of years.

• In the past, Twitter shares have seen a large range of moves on earnings, anywhere from essentially unchanged to a swing of around 19 percent. In the past two years, the average move on earnings has been just over 10 percent, and the average move in the last year has been nearly 12 percent.

• Notably, even with the stock’s monster year-to-date performance, the market is not pricing in increased risk for the stock heading into the report. From a fundamental perspective, Susquehanna Internet analyst Shyam Patil covers Twitter with a neutral rating. Metrics he’s watching for are continued user engagement and monetization, particularly in live video.

• Investors could look to buying puts for protection, whether it be specific to this earnings report or even a little bit further out to protect into year-end.

Analysts on average are expecting earnings of 16 cents per share, according to FactSet data.

Bottom line: Even after Twitter’s huge gain this year, Gilbert said the options market is not pricing in increased risk for the stock heading into earnings.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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