$BABA option bulls get quick profits

Bullish option traders are scoring quick profits in Alibaba (BABA) today.

On Jan. 19, Market Rebellion’s Unusual Option Activity Service found that 11,000 Weekly $70 calls, expiring Jan. 26, were bought for $0.43 to $1.53 with shares at $67.09. This was clearly fresh buying, as open interest in the contract was just 3,516 before the activity appeared.

Those calls have changed hands for as much as $4.74 this session, a 209.8% return, while the stock rose 11.04% in the same time frame, illustrating the kind of leverage that can be achieved with options.

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 7.2% at $73.57 this morning.