Options traders looking to take advantage of upside on Docusign earnings

The work-from-home trade has taken Docusign on a wild ride higher, but not so high that options traders aren't willing to bet on even more gains when the company reports earnings after the bell Thursday.

Despite a double-digit pullback on Thursday in sympathy with the rest of the tech trade, the digital document signing stock has cruised more than 200% higher this year. That's a huge run. But, while most options traders are justifiably wary of jumping head first into this name before a catalyst like an earnings report, they're more than happy to use the tools at their disposal to make bullish bets while limiting their overall risk.

"Calls outpaced puts about three times to one [on Wednesday], but before you get ahead of yourselves, I'm going to tell you why, reading a little bit more into that, might not be what it seems. Options imply about a 20% move [higher or lower] between now and Friday expiry. That's almost double what we've seen, which is an 11% move, on average," Bonawyn Eison, managing director at XP Investments, said Wednesday on CNBC's "Fast Money."

That volatility hasn't just been implied in Docusign as of late. The stock itself has been making big moves, which could be catching investors off guard. 

"The stock has traded just [Wednesday] in a range of $250 to $290," said Eison, "and the trade that really stuck out to me was the Friday expiry 300-strike calls. Those traded at about $17."

As of Wednesday's close, those contracts would have required Docusign to hit the upside of that implied move on the nose just to break even, and these traders will now need an even larger move to make their money back after Thursday's sell-off. However, a sudden pullback is likely exactly what these traders were protecting themselves from by using options, instead of buying the shares outright.

"The stock has been up about 250% this year, outlaying $17 on [a move] 20% higher, which is where your breakeven is, and you're mitigating your risk down to about 5% [of the current stock price]," said Eison.

Docusign was about 13% lower Thursday. 

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