Bulls double money in $LK

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

On Dec. 30, our Unusual Activity Service detected the purchase of 4,750 January $38 calls bought for $2.90 to $2.92 as part of a bullish roll with shares at $37.86. Open interest in the strike before that session began was just 2,195 contracts, indicating that this was a new position.

Those calls traded for as much as $7.30 today, about twice their purchase prices. The stock rocketed 18.17% 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 10.62% to $43.65 in midday trading. The Chinese coffee company announced yesterday that it will launch an unmanned coffee machine.