Alibaba calls boast 23,000% gain

Bullish traders booked stratospheric profits on option positions in Alibaba before they expired yesterday.

Way back on April 24, Investitute’s proprietary programs found that 7,500 July $130 calls were purchased for $0.91 with shares at $114.74. Open interest in the strike was only 1,743 contracts before that session began, showing that this was a new position.

Those calls traded as high as $22.05 before expiring yesterday afternoon, representing a profit of more than 23,000 percent. The stock was up 32.5 percent in the same time period, a large move but nowhere near that of the options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

BABA was down 0.14 percent to $151.89 yesterday. The Chinese e-commerce giant surged on an unexpectedly bullish sales outlook in June and rallied again this month after launching a voice-activated product similar to those made by rival Baidu, Amazon.com, and Apple.