$MELI calls ring up big gains

Option traders more than doubled their money on bullish positions in MercadoLibre today.

On Nov. 29, Investitute’s proprietary programs flagged the purchase of 5,000 March $290 calls for $72 as part of a bullish roll with shares at $343.87. This was clearly a new position, as open interest in the strike was a mere 44 contracts before that session began.

Those calls traded for $163 today, more than twice their purchase price. The stock rallied 31.31% in the same time period, 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.

MELI jumped 7.01% to $481.11 today. This morning JP Morgan raised its price target to $515 from $430 for the Latin American e-commerce giant, citing “positive trends” in the fourth quarter.