$BABA bulls log big profits

Option traders have doubled their money on large upside positions in Alibaba (BABA).

On Aug. 5, Our market scanners flagged the purchase of 25,000 January $155 calls for $13.55 to $14.16 as part of a bullish roll with shares at $153. Volume was far above the strike’s previous open interest in that strike, showing that this was a new position.

Those calls traded for as much as $26.60 today, twice their initial purchase price. The stock rose 13.46% at the same time, illustrating the kind of leverage that can be achieved with options.

Co-founder Jon Najarian cited additional buying in November calls today on CNBC’s “Halftime Report.”

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

BABA is up 4.2% to $173.99 this afternoon. The Chinese e-commerce giant beat earnings and revenue estimates yesterday.