$BIDU calls double overnight

Option traders turned quick profits today on bullish bets made just hours before Baidu (BIDU) reported earnings last night.

Just yesterday, Our market scanners found that 4,200 Weekly $110 calls expiring this Friday were bought for $2 to $2.65 with shares at $103.58. This was clearly fresh buying, as open interest in the strike was only 1,267 contracts before the activity appeared.

Those calls traded for as much as $4.30 today, more than twice their initial purchase price. The stock rose 9.45% at the same time, illustrating the kind of leverage that can be achieved with options.

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.

BIDU is up 5.68% to $110.14 today. The Chinese search-engine operator topped quarterly estimates after the market closed yesterday.