$NIO option bulls charge for gains

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

On Jun. 28, Market Rebellion’s Unusual Activity Service found that 9,300 Weekly $48 calls, expiring this Friday, were bought for $.57 to $1.37 above open interest of just 4,659 contracts with shares at $45.62.

Those calls traded up to $2.88 today, more than double their purchase prices. The stock rose 10.87% 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 5.66% to close at $53.20. Citi raised its price target on the shares to $72 from $58.30 yesterday afternoon.