$NIO calls score big profits

Option traders made exponential gains today on upside positions opened in Chinese electric-car maker NIO (NIO).

On May 7, Market Rebellion’s Unusual Activity Service flagged the purchase of 7,782 June $4.50 calls in two prints for $0.29 with shares at $3.60. This was clearly fresh buying, as open interest in the strike was only 4,512 contracts before that session began.

Those calls traded up to $2.46 today, more than 8 times their purchase prices. The stock rose 93.89% 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 11.97% to close at $6.83 today after printing a new high 52-Week high of $6.99 earlier in the session. The Shanghai-based auto manufacturer’s shares have been on the rise since its last earnings report on May 28, where a narrower loss than expected was disclosed for its Q1 period.