Option traders are scoring big profits in upside positions opened on IQiyi (IQ).
On Dec. 12, Market Rebellion’s Unusual Option Activity Service found that 10,400 January $4 calls were bought for $0.31 to $0.35 with shares at $3.45. This was clearly fresh buying, as open interest in the contract was just 2,671 before the activity appeared.
Those calls traded for as much as $2.35 this session, more than 6.5 times their purchase prices. The stock rose 80.58% at the same time, underscoring how quickly 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.
IQ was last up 11.13% at $5.89.
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