$IQ calls surge tenfold in a day

Option traders posted exponential profits today on bullish positions opened only one session earlier in Chinese company IQiyi.

Just yesterday, Investitute’s proprietary programs flagged the purchase of 4,500 May $17.50 calls for $0.55 to $1.50 with shares at $18.63. Volume was well above the strike’s open interest of 2,613, indicating that this was new positioning.

Those calls traded for $5.50 today, 10 times its original purchase price. The stock rallied 23.1% in the same time, a large move but 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.

IQ jumped 11.28% to $20.72 today. The Beijing-based online entertainment service, a spinoff from Baidu, rose sharply after announcing that it had been certified as the first Internet-based video platform in China.