$JD call buyers shop for big gains

Option traders that made bullish trades in JD.com (JD) on Tuesday are scoring big today.

On Nov. 3, Market Rebellion’s Unusual Activity systems detected the purchase of 5,500 Weekly $85 calls expiring on Nov. 6 for $0.45 to $0.85 with shares at $81.63. Volume was well above the strike’s previous open interest of just 3,785 contracts, indicating that this was a new position.

Those calls traded up to for $6.60 this morning, at least 7 times their purchase prices. The stock rose 11.93% 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 last 2.36% to $91.42 in early trade.