$IQ calls prices rise

Option traders posted big and fast profits today on bullish positions opened in Chinese company IQiyi (IQ).

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity on two different occasions over the last weeks, targeting this Friday’s expiration cycle.

–On Oct. 19, 2,000 Weekly $24 calls expiring Oct. 30 were purchased for $0.32 to $0.47 above open interest of 20 contracts with shares at $22.74.

–And yesterday on Oct. 27, 2,600 Weekly, 30October $23.50 calls were purchased for $0.30 to $0.57 above open interest of 271 contracts with shares at $23.15. Market Rebellion co-founder Pete Najarian cited this activity at CNBC’s “Halftime Report”.

Those calls have each traded for as much as $0.85 and $1.25, respectively, so far this session, at least 2 times their purchase prices. The stock rose by as much as 8.44% in the same time period, illustrating how options can far outperform moves in their underlying shares 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.

IQ jumped 2.71% to $24.63 today. The Beijing-based online entertainment service has seen its shares rise this week and is estimated to report earnings next on Nov. 5.