$SOGO calls rack up huge profits

It has taken barely a week for bullish option traders to reap enormous gains in Chinese company Sogou.

On June 4, Investitute’s proprietary programs flagged the purchase of 2,000 June $12.50 calls for $0.03 to $0.15 with shares at $10.98. This was clearly fresh buying, as open interest in the strike was just 67 before that session began.

Those calls traded up to $2.70 today, at least 18 times their purchase prices. The stock rose 21.7% in the same time frame, showing how quickly options can far outperform gains in their 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.

$SOGO popped 3.51% to $13.85 today. The Beijing-based Internet search service had fallen for months since its debut on the New York Stock Exchange in November last year, but it has rebounded since reporting strong quarterly numbers in April. The company’s next earnings report is estimated for July 24.