$NIO bulls charge up gains

Option traders are charged up with big gains today on upside positions opened in Chinese electric-car maker NIO (NIO).

On Dec. 16, Market Rebellion’s Unusual Activity Service flagged the purchase of 2,200 Weekly $50 calls, expiring on Jan. 22, for $4.30 to $4.85 with shares at $43.86. This was clearly fresh buying, as open interest in the strike was only 1,061 contracts before that session began.

Those calls traded up to $17.60 today, more than 3.5 times their purchase prices. The stock rose 52.17% in the same time, underscoring how quickly options can far outpace gains in their underlying shares 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.

NIO was up 6.42% to close at $62.70, printing new all-time highs this session. JPMorgan upgraded its price target on the shares to $75 from $50 this morning.