$IQ calls score fivefold gains

Option traders have turned exponential profits on bullish positions opened in Chinese technology company iQIYI less than a week ago.

On Jan. 4, Investitute’s tracking systems found that 2,200 Weekly $16.50 calls expiring on Jan. 11 were purchased for $0.25 to $0.40, while 5,000 February $17.50 calls were bought for $0.89 to $0.93. This was all new positioning, as volume was well above previous open interest in both strikes with shares trading around $16. Investitute co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report.”

The January calls that expire tomorrow traded up to $1.67 this afternoon, 5 times their average purchase price, while shares gained 13.38% in the same time frame. The February calls went for as much as $2.08 just before the closing bell, more than double their purchase prices, with shares up 15.5%.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

IQ jumped 5.03% to $18.16 today. The Beijing-based online-video service has risen with other Chinese names amid optimism over trade talks with the United States.