Mike Khouw Sees Unusual Options Activity In Gap

On CNBC's "Options Action," Mike Khouw said that Gap Inc GPS traded at more than twice its average daily options volume on Wednesday.

The company is scheduled to report earnings on Thursday and the options market is implying a move of 9.4% in either direction. Its average move for the event is 7.1%.

Khouw noticed one large trade during the trading session on Wednesday. It was a sale of 2,865 contracts of the August $14.50 put for 12 cents. The seller is willing to own the stock at $14.50 or around 15% below the current stock price. Khouw added that this could also be a trader with a short position, looking to cover at these levels.