Alibaba calls net 1,000% in a day

Bullish option traders turned astronomic profits in Alibaba in 24 hours.

Just yesterday, Investitute’s tracking systems detected the purchase of 5,100 June $127 calls for $1.30 to $1.68 with shares at $125.17. Volume was double the strike’s open interest, indicating that this was fresh buying.

Today those calls traded up to $16.40, a profit of roughly 1,000 percent. The stock rose less than 18 percent at the same time, underscoring how far and quickly options can outperform their underlying shares.

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.

BABA jumped 13.29 percent today to close at $142.34. Shares gapped up from below $126 at the open after the Chinese e-commerce giant projected sales growth of up to 49 percent this year, far above Wall Street expectations.