Bulls triple money in $LK

Option traders have scored exponential profits on upside positions in Luckin Coffee (LK).

On Aug. 14, our Unusual Activity Service detected the purchase of 5,000 December $20 calls bought for $4.30 above open interest of 606 contracts as part of a bullish roll with shares at $20.80. Market Rebellion co-founder Pete Najarian cited the unusual activity at that time on CNBC’s “Halftime Report,” followed by more trades in the name cited by Jon Najarian in October.

Those calls traded for as much as $12.53 today, about 3 times their purchase price. The stock rocketed 56% in the same time period, a huge move but still nowhere near that of its options 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.

LK is up 6.57% to $31.81 in midday trading today. KeyBanc raised its price target to $32 from $24 on the Chinese coffee company Friday.