Mike Khouw Sees Unusual Options Activity In Splunk

On CNBC's "Options Action," Mike Khouw said there is usually a lot of activity in the options market ahead of a catalyst for a stock.

In Splunk Inc (NASDAQ: SPLK), there was a lot of activity after the company reported a disappointing earnings report. Splunk traded more than 38 times its average daily call options volume on Thursday and most of that activity was concentrated in December 4 expiry.

Traders were buying the December $160, $165 and $170 strike calls, betting there could be some intraday volatility. Khouw thinks this is one of the situations when traders can use options to their advantage.