$QD bulls post big gains intraday

It took just a few hours for option traders to more than double their money in Qudian today.

In midday trading, Investitue’s proprietary programs flagged the purchase of 2,400 March $12.50 calls for $0.50 to $0.78 with shares at $12.90. This was clearly fresh buying, as open interest in the strike was a mere 18 contracts before the activity appeared.

Those calls rose to $1.20 by the end of the session, nearly 2.5 times their original purchase price. The stock rose 2.3% at the same time, showing how quickly options can far outpace gains in 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.

QD was up 3.24% to close at $13.05 this afternoon. The Beijing-based consumer-credit provider rose as large Chinese stocks rallied today.