Calls double overnight in $NIO

It took only a few minutes of trading for upside option positions to pay off in Chinese electric-car maker NIO.

Just before the closing bell yesterday, Investitute’s proprietary programs cited the purchase of 5,100 October $7 calls for $0.22 to $0.95 with shares at $7.23. Volume was well above the strike’s open interest of 3,813 contracts, indicating this this was fresh buying.

Those calls rose to $1.50 right after the session opened this morning, 2.5 times their average purchase price The stock rose 14.25% at the same time, showing how quickly 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.

NIO rose to $8.35 early today before settling back to close at $7.75, still up 4.87% on the session. Shares rallied on news that investment firm Baillie Gifford, a major stockholder in Tesla, had taken an 11.44% stake in the Shanghai-based company.