Bulls browse for gains in $VIPS

Vipshop (VIPS) popped to a new all-time-high today, handing exponential profits to bullish option traders.

On Dec, 11, Market Rebellion’s Unusual Activity Service found that 7,00 February $27 calls were bought for $1.90 as part of a bullish spread with shares at $25.47. This was clearly fresh buying, as open interest in the strike was 115 contracts before the activity appeared.

Those calls traded up to $4.60 so far today, more than 2 times their purchase price. The stock popped 23.4% in the same time frame, showing how quickly options can far outperform moves in the 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.

VIPS was last up 6.02% to $31.02. The Chinese discount retailer was upgraded to Overweight from Underweight with a raised price target of $33 from $14.50 at Morgan Stanley yesterday afternoon.