$NIO calls turn huge profits

In just three weeks bullish option traders reaped significant profits in NIO.

On Feb. 6, Investitute’s proprietary programs found that 19,000 March $9 calls were purchased from $0.35 to $0.50 with shares around $7.97. This was clearly fresh buying, as volume was far above the strike’s open interest of 3,919 before the activity appeared.

Those calls traded for as much as $1.50 today, three times their most expensive purchase prices. The stock rose 28.11% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

NIO climbed to $10.25 early this morning before pulling back to close at $9.85, up 0.82% on the session. The electric car maker, based in China, has seen its shares advance sharply since a 60 Minutes overview over the weekend.