Bulls get behind the wheel of $LI

Bullish option traders are behind the wheel driving big gains in upside positions opened in Chinese electric-car maker Li Auto (LI).

On Oct. 12, Market Rebellion’s Unusual Activity Service flagged the purchase of 4,100 November $22.50 calls for $0.69 to $0.87 with shares at $18.28. This was clearly fresh buying, as open interest in the strike was only 526 contracts before that session began.

Those calls have traded up to $6.50 so far today, more than 7 times their purchase prices. The stock rose 55.53% in the same time, underscoring how options can far outpace gains in their underlying shares on a relative basis.

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.

LI was last up 7.43% at $27.19, printing new all-time highs this session. The Chinese electric vehicle manufacturer, which was initiated with a Neutral rating and $27 price target at Citi yesterday, is making new all-time highs this session.