CSX kicks off a big slate of earnings for the transports after the bell Thursday.
The rail freight stock finds itself pushing above the level it gapped down to after a weak earnings report in July, and a strong beat this time around could take the name even closer to its 2019 highs. However, options traders aren't quite ready to go all in on CSX.
"We saw that calls were outpacing puts by 4 to 1. On face value, that might seem bullish, but some of that was actually profit-taking on the 72.5 calls. People were selling those calls, which have nearly tripled [in value] in the last nine days," Michael Khouw, president of Optimize Advisors, said Wednesday on "Fast Money."
The options market is implying a move of about 4% in either direction between when CSX reports and Friday's close. A 4% decline would only bring the stock down to about $73, which is a move that at least one trader thinks is fairly cheap.
"The trade that I saw was a buyer of the January 75-puts for $1.20. They bought 500 of those, and they also purchased 25,000 shares of this stock for $75.48," said Khouw. "When you put that together, it's synthetically equivalent to having bought the 75-straddle.
"When you buy a straddle, you're betting on volatility, and that's what this trader is betting: that the stock will be more than 4% higher or lower by Friday when these options expire."
The way this bet works out, this trader's break-even level would be about $2.88 higher or lower than that synthetic 75-strike price by Friday.
CSX was about 1.5% higher in Thursday's session.