JD.com calls spike near new highs

Short-term traders are cashing in as JD.com trades just below all-time highs.

On May 3, Investitute’s proprietary systems showed that 7,000 Weekly $35 calls expiring this Friday were purchased for $0.80 to $0.95 with the stock at $34.71. Volume was double the strike’s open interest, indicating that this was fresh buying.

Those calls traded for $3.70 today, a gain of more than 300 percent. The stocked rose 11 percent in that time, 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.

JD slipped 0.05 percent to $38.53 today, not far from a lifetime high of $39.09 reached one session earlier. The Beijing-based e-commerce company, a major competitor to Alibaba, raised guidance as it beat estimates on the top and bottom lines yesterday morning.

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