$MELI calls rack up huge gains

Bullish option traders have doubled their money with big bets on MercadoLibre.

On March 7, Investitute’s proprietary programs flagged the purchase of 12,445 September $350 for $127.90 as part of a bullish roll with shares at $455.68. Open interest in the strike was only 1 contract before the trade occurred, showing that this was a new position.

Those calls were marked at $244.25 this afternoon, about twice their purchase price. The stock rose 28.74% in the same time frame, underscoring how options can far outperform 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.

MELI surged 20.02% to $578.94 today. The Latin American e-commerce giant blew past quarterly estimates after the market closed yesterday.