Mike Khouw Sees Unusual Options Activity In UPS

On CNBC's "Options Action," Mike Khouw said that United Parcel Service, Inc. UPS saw more than two times the average daily call volume on Tuesday. The company is scheduled to report earnings on Wednesday before the market opens and the options market is implying a move of 7.5% in either direction. The stock moved around 4% on average over the last eight quarters.

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During the session on Tuesday, Khouw noticed a purchase of around 5,000 contracts of the October $175 calls for just under $4.50. Buyers of these calls are betting that the stock is going to trade above $179.50 or around 5% above the closing price on Tuesday.