$BABA bulls rack up gains overnight

Bullish option traders are racking up huge overnight gains in Alibaba (BABA) today.

Just yesterday afternoon on Aug. 23, Market Rebellion’s Unusual Option Activity programs detected the the purchase of 10,000 Weekly $160 calls, expiring this Friday, for $4.80 to $6.20 with shares at $158.67. Volume was clearly above the previous open interest of 5,962 contracts, indicating that this was a new position.

Those calls have traded for as much as $14.70 today, at least double their purchase prices. The stock rose 9.68% in the same time frame, underscoring how options can far outperform their underlying shares.

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.

BABA was last up by 6.95% at $172.29 this afternoon, rebounding from a new 52-Week low set yesterday.