$NIO call prices charge up overnight

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

Only yesterday, Jul. 8, Market Rebellion’s Unusual Activity Service found that 5,200 Weekly $53.50 calls, expiring today, were bought for $1.26 to 1.76 above open interest of just 420 contracts with shares at $43.33.

Those calls traded up to $3.50 today, double their purchase prices. The stock rose 8.12% 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 down by 0.18% to close at $45.53 after trading as high as $47.01 earlier in the session. HSBC raised its price target on the shares to $69 from $54 this morning.