Options trader makes a big bet on volatility into CSX earnings

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-"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.

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