Bulls score big profits $VIPS

Vipshop (VIPS) popped higher today, handing exponential profits to bullish option traders.

On Apr, 21, Market Rebellion’s Unusual Activity Service found that 10,000 Weekly $28.50 calls, expiring this Friday, were bought for $0.90 as part of a bullish spread with shares at $27.75. This was clearly fresh buying, as open interest in the strike was just 494 contracts before the activity appeared.

Those calls traded up to $4.00 today, more than 4 times their purchase price. The stock popped 16.97% 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 up 2.24% to close at $32.45. The Chinese discount retailer is next estimated to report earnings on May 26.