$NIO calls score quick profits

Option traders doubled their money on upside positions in Chinese electric-car maker NIO before they expire tomorrow.

On March 27, Investitute’s proprietary programs found that 3,167 Weekly $5 calls expiring this Friday were bought in one print for $0.25 with shares at $5.05. Open interest in the strike was only 443 contracts before the trade occurred, showing that this was a new position.

Those calls traded up to $0.50 today, twice their purchase price. The stock rose 14.46% in the same time, underscoring how quickly options can far outpace gains in their underlying shares on a relative basis.

It is the second winning trade in the name posted on Investitute in the last month.

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 0.92% to $5.36. The Shanghai-based auto manufacturer was upgraded to “neutral” from “underperform” at BofA/Merrill with a $6.20 price target while Citi lifted the name to “buy” from “neutral” but cut its target to $6.80 from $7.20.