Bulls keep riding with $NIO

Option traders are driving with big gains today on upside positions opened in Chinese electric-car maker NIO (NIO).

On Sep. 24, Market Rebellion’s Unusual Activity Service flagged the purchase of 8,878 October $22 calls as part of a bullish roll for $0.58 to $0.64 with shares at $17.83. This was clearly fresh buying, as open interest in the strike was 4,848 contracts before that session began.

Those calls traded up to $5.00 today, more than 8 times their average purchase price. The stock rose 50.98% in the same time, underscoring how quickly 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.

NIO was last up 21.88% at $26.35 after printing a new high of $26.96 earlier. JP Morgan raised its price target on the Shanghai-based auto manufacturer’s stock to $40 from $14 this morning, and Citi raised its target to $33.20 from $18.10.