Cheap bets pay off for $QD bulls

Option traders have racked up big profits in Chinese financial firm Qudian ahead of its earnings report next week.

On Jan. 23, Investitute’s tracking systems detected the purchase of 3,400 March $15 calls for $0.10 to $0.40 with shares at $12.79. Open interest in the strike was just 1 contract before the trades occurred, showing that they were new positions.

Those calls traded up to $1.20 today, 12 times their original purchase price. The stock rose 20.2% at the same time, reflecting the kind of leverage that can be obtained through 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.

QD was up 2.96% to $15.29 today. The Beijing-based consumer-credit provider is scheduled to announce fourth-quarter results on Monday, March 12.