Bulls post big gains in $QD

Qudian (QD) spiked higher today, yielding huge returns on upside option positions.

On Mar. 3, Market Rebellion’s Unusual Activity Service identified the purchase of 5,400 March $2 calls for $0.40 to $0.55 with shares at $2.30. This was clearly a new position, as open interest in the strike was only 591 contracts before the trade occurred.

Those calls have changed hands for as much as $1.23 so far this session, at least double their purchase prices. The stock rose 39.57% 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.

QD has surged 10.54% to $3.10 today. The Beijing-based online consumer-credit service is estimated to report earnings on Mar. 17.