$NIO calls score more profits

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

Market Rebellion’s Unusual Option Activity Service flagged bullish option activity in two contracts in the name during the same session early this month:

–On Jun. 3, 24,000 June $6 calls were purchased for $0.21 to $0.38 above open interest of 1,879 contracts with shares at $5.14.
–Also on Jun. 3, 2,000 June $6.50 calls were bought for $0.31 to $0.35 above open interest of 595 contracts with shares at $5.38.

Those calls have traded up to $1.60 and $1.16 today, respectively, more than 4 and 3 times their purchase prices. The stock rose as much as 47.66% in the same time, underscoring how quickly options can far outpace gains in their underlying shares on a relative basis.

They mark the second and third winning trades posted on Market Rebellion, just this week, in the name.

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 last up 2.72% at $7.38 today after printing a new high 52-Week high of $7.63 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.