$JD call buyers score big

Option traders that opened bullish trades in JD.com (JD) last week are scoring big today.

Just last week, on Jun. 24, Market Rebellion’s Unusual Activity Service found that 2,800 Weekly $75 calls, expiring Jul. 2, were bought for $0.81 to $1.20 with shares at $73.64. This was clearly fresh buying as open interest in the strike before the activity appeared was only 1.687.

Those calls traded up to for $4.70 this afternoon, about 4 times their purchase prices. The stock rose 8.13% in the same time period, showing how 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.

JD was up by 3.41% to $79.75 at the close.