Bullish option traders are scoring big gains in Alibaba (BABA) today.
On Nov. 14, Market Rebellion’s Unusual Option Activity Service found that 2,500 Weekly $97 calls, expiring today, were bought for $1.28 to $1.29 with shares at $72.59. This was clearly fresh buying, as open interest in the contract was just 490 before the activity appeared.
Those calls have traded for as much as $6.20 so far today, at least 4.5 times their purchase prices. The stock rose 26.06% in the same time frame, underscoring how options can far 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 was last up by 6.22% at $91.30 this morning.
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