$VIPS calls soar tenfold in a week

Upside option traders turned huge gains in Vipshop ahead of quarterly results next week.

On Monday, Investitute’s market scanners identified the purchase of 5,000 November $9 calls in one print for $0.10 with shares at $8.25. This was clearly a new position, as open interest in the strike was only 681 contracts before the trade occurred.

Those calls sold for $1 this morning, 10 times their purchase price. The stock rallied 22.3 percent at the same time, an impressive move but one that pales in comparison to that of 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.

VIPS surged 10.14 percent to $9.78 today. The Chinese online discount retailer reports earnings on Tuesday, Nov. 21, after the market closes.