It didn’t take long for bullish option traders to make big money in Chinese e-commerce company 58.com.
Late Friday, Investitute’s tracking systems detected the purchase of 3,000 September $55 calls for $1.75 to $1.85 with shares at $53.20. These were clearly new positions, as open interest in the strike was only 386 contracts before the activity appeared.
Those calls traded for $9.90 today, a gain of 450 percent in less than one full session. The stock was up 21.8 percent at the same time, a big jump but still far short of the move in its options 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.
WUBA surged 20.56 percent to close at $64.14 today after reaching a new 52-week high of $64.95 a few minutes earlier. The company, which is often called “the Craigslist of China,” blew past earnings and revenue estimates last night.