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Is Amazon primed for an earnings breakout? Options traders aren't so sure

Options traders don't think earnings will pull Amazon out of the doldrums

Amazon heads into Thursday's earnings report deep in the weeds and in need of something for investors to get excited about.

The tech-slash-retail giant is down nearly 12% in the last three months, making it the worst performer among the FAANG (Facebook, Apple, Amazon, Netflix and Google parent Alphabet) stocks during that period. The name has languished since a mid-August plunge, and options traders aren't overly optimistic that Thursday's report will kick-start meaningful gains.

However, there is one interesting stat that may point to the possibility of a breakout.

"The options market is implying a move of about 4%, and that's less than the 4.7% or so that it has averaged over the course of the last eight quarters they've reported. They're going to be reporting their third quarter, which has historically been the most volatile," Optimize Advisors President Michael Khouw said Wednesday on "Fast Money." "Over the last 10 years or so, we're looking at an average move of about 9% during that period."

Of Amazon's last 11 third-quarter reports, six have pushed the stock into a positive move, with the largest being a 27% post-earnings surge in 2009.

But Wednesday's most eye-catching trade in the options market wasn't playing for a breakout, but rather attempting to thread the needle.

"We saw somebody buy 300 of the Oct. 25 weekly 1,795/1,800/1,805 call butterflies," Khouw said.

"They're basically targeting that middle strike, 1,800, and it has to be between the other two for this to be profitable. The thing is, they only spent about 16 cents for that, and it could be worth as much as $5. That would be a payout of about 30-to-1."

Since each options contract is worth 100 shares of stock, this trade could be valued at $484 per contract if Amazon does finish the week at $1,800, meaning this trader stands to gain nearly $150,000 if all goes according to plan.

"If you look back over the course of the last 10 years or so, this only would have worked out twice, but you still would have been profitable because you would have gotten that 30-to-1 payout the two times that it did work out," Khouw said.

Amazon was trading slightly higher in Thursday's session.