Bulls shop for a winner in $JD

Option traders that made bullish trades in JD.com (JD) at the start of this month are seeing exponential gains today as the stock makes a new 52-Week high.

On May 1, Market Rebellion’s Unusual Activity systems detected the purchase of 20,000 Weekly $41.50 calls expiring this Friday, May 22, for $2.09 to $2.24 as part of a bullish spread, with shares at $41.00. Volume was well above the strike’s previous open interest of just 59 contracts, indicating that this was a new position.

Those calls traded for $13.40 today and ended the session marked at $13.95, each more than 6 times their purchase prices. The stock rose 33.93% in the same time period, showing how options can far outpace 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.

JD was up 9.2% to $55.53 at the close today. The Chinese e-commerce stock topped expectations in its last earnings report delivered Friday morning.